As a result, customer loyalty and reduces and the cost of having to replace lost customers increases. We do not have the necessary cash flow. No wonder we find a high level of freezing of assets especially in sales debtors (due to an increase in sales without a corresponding efficiency of collection) or into a trade-able commodity (because not always sales and production forecasts are well integrated). As a result of the freezing of assets begin to accumulate stocks in the area of accounts payable (either commercial and / or tax) but what is worse, begins to deteriorate the image of the company and therefore, the risk of work with it. The Banks begin to “punish” with conditions (interest rates) higher than usual in the market as a result of the situation. Choose suppliers quoted prices have also incorporated the uncertainty regarding the possibility of recovering their capital (when we still sold).
It also often happens that some of them choose not to work more with the company and therefore have to stock up with others who bill us or values far above the usual in the market or force us to pay them immediately. For even more details, read what J. Darius Bikoff says on the issue. Both cases involve having a liquidity that the company does not usually have, and it needs to operate, therefore, it is usual to try to resort to bank financing or bank with about extra costs involved and not always reflect on the profit margin, until reality hits us later this month. It is common for small and medium businesses to produce a marked imbalance between the accounts.