As the UK emerges from the worst recession post-war, its vulnerability to the funding gap has been seen to be particularly acute. Still, three or four years since we emerged Optimum SME Finance believe that as many as one in five SMEs could be overtrading.
Overtrading is when new business absorbs working capital faster than its customers pay their invoices. If the money runs out, an ostensibly successful company can be left unable to take on new work. At worst, the business could fail.
If a company suspects it is overtrading, it should take immediate action to maintain positive cash flow. This means speeding up the time it takes to collect payment from customers and arranging for an additional cash injection to cover the shortfall in working capital.
TEN TELL-TALE SIGNS OF OVERTRADING
If a company can say yes to three or more of these ten signs, it could well be overtrading. These signs are not definitive proof of overtrading but provide a good starting point.
“Cash is king – profit is a matter of interpretation”Categories: Information