Preventing business failure
Failing to manage cash and cash flow can cause business failure. Even if a business has many customers, it can still have .
There are two instances when a business can suffer cash flow problems:
- at , when large amounts of money need to be invested to get the business started, for example to pay for equipment, initial stock, rent, insurance, hiring, training and staff costs
- during rapid growth, when the business needs to grow quickly but cannot keep up with the cash being paid out, for example, if the business needs to find larger premises and invest in making them ready to move into
If a business has customers who are not paying what they owe, this means that the business may be unable to pay its own bills and may become .
Businesses need to reduce the risk of failure and insolvency. Three possible steps to get out of negative cash flow are:
- negotiate an facility
- keep costs under control
- keep cash coming into the business by arranging sensible credit arrangements with suppliers and customers, and having fewer customers who pay for products and services on
