3. Lack of Liquidity:
Liquidity is crucial and refers to the availability of cash in the company to pay its creditors and debts on time and still retain earnings in the company. Liquidity will provide the capacity of any business to be prepared for any cash disbursement without burden on where the cash will come from.
In managing a business it’s important to have available cash to be used not only for normal business operations, but for any unforeseen payments that may arise.
A business should examine the cash flows of the company to be sure that accounts receivables are being collected per the terms. If they are seeing a delay (60, 90 or 120 days behind) then the business will not have the cash flow to pay its creditors.
Amy Mazigian is branch manager at U.S. Bank Bismarck North.