A sudden increase in demand can happen for many reasons and it may seem like great news at first. But sometimes it can have a negative effect on a business.
‘Overtrading’ happens when a business struggles to find the resources or cash necessary to service a customer before the business is paid. It’s a common problem and often affects start-ups and small firms that are trying to expand rapidly.
Overtrading can have many negative effects. Not only can it place a strain on finances and cause unnecessary stress, it can also damage the business’s reputation if quality dips or the business fails to deliver on its promises. Invoice finance and asset finance can offer solutions to cashflow issues caused by overtrading.
Aldermore Bank has produced the infographic below about overtrading and the cashflow issues it can create for small firms.