Q&A - What are the main causes of a cash flow problem?

A cash flow problem arises when a business struggles to pay its debts as they become due.

Note that a cash flow problem is not necessarily the same as experiencing a negative cash flow. A business often experiences a net cash outflow, for example when making a large payment for fixed assets or where there is a seasonal drop in demand.

However, when cash flow is consistently negative and the business uses up its cash balances, then the problems become serious.

The main causes of cash flow problems are summarised below: