Causes of cash flow problems
- AS, A-Level
- AQA, Edexcel, OCR, IB
Last updated 22 Mar 2021
What is a cash flow problem and what do they happen so often in all types of business?
A cash flow problem can be defined as:
When a business does not have enough cash to be able to pay its liabilities
The main causes of cash flow problems are:
- Low profits or (worse) losses
- Over-investment in capacity
- Too much stock
- Allowing customers too much credit
- Unexpected changes
- Seasonal demand
Let's look at these in a little more detail.