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Over-Trading

In business economics, overtrading occurs when a business expands its sales and operations too quickly without having enough working capital or cash flow to support the growth. It often happens when a firm takes on too many orders or increases output without securing the finance needed to pay suppliers, wages, or other short-term obligations.

Overtrading can lead to cash flow problems, delayed payments, increased borrowing, and even insolvency — despite strong sales. It is particularly risky for growing businesses that rely heavily on credit or have thin profit margins. Signs include rising receivables, stock build-up, and a strained bank balance.