Resolved Question

What sort of cash flow problems might a business experience...?

...and what actions might a business take to solve these?

Best Answer - Chosen by Asker

Delays in payment from customers for goods and/or services. Actions would be to encourage payment by cash, or direct debit. Ensure prompt invoicing.

Paying too much interest for loans. Actions include shopping around for a better deal.

Paying suppliers too quickly. Actions would be to negotiate longer credit terms, e.g. 60 days instead of 30.

These are the main ones.

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Other Answers (2)

• basic cash flow 101: you need enough funds in you account to sustain your invoice period
  i.e. you invoice your client day 1 but you will not receive payment until day 30...but you need to have funds to run you business in the meantime. calculate your over heads i.e. wages, fixed and Variable costs, petrol, telephone, rent, rates, insurance, interest etc and what time of the month payments are due, if you have enough funding at each point in time throughout the month to meet your bills you have positive cash-flow... if you don't you have negative cash-flow. create a simple cash-flow forecast in excel and you will see if your business is viable.
  
  The problem is, a business does not raise all its invoices on the 1st day of the month, they are produced as services take place or goods are sold so if you raise an invoice on the 20th Jan it might not be paid until 20th Feb but a large amount of a businesses bills often are due at the end of the each month. hope this is helpful

  Source(s):

• You should really go to business school