Small Business...?

Question

What types of problems are created in a business due to inadequate cash flows?

Answer 1

Typically, inadequate cash flows relate to the fact that more cash is flowing out than coming in. If it were the other way the there would be excess cash and there would be no problem. Inadequate cash flows simply relate to the fact that there is not enough cash to pay all of the bills in that payment cycle. So bills have to be postponed for thirty days and cause your company to be listed as an accounts receivable problem on the other end.

You also may not have enough cash flow to replenish inventory so you have nothing to sell and you may not have enough cash flow to pay your employees thus creating an employee morale problem as well as a customer service problem because of unhappy employees.

You can take this even further.

Answer 2

The two biggest problems are not being able to purchase supplies and not being able to pay employees. Without supplies and employees, you can't generate income.