Author Topic: Internal causes of Business failure  (Read 1396 times)

Maliha Islam

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Internal causes of Business failure
« on: February 16, 2019, 11:58:14 AM »
Internal causes of Business failure

Lack of management: Managing a successful SME requires not only good creative and operational skills but good business and managerial skills too. Many SME’s do not have the skills in areas such as financial reporting, marketing, customer relations, and financial management.

The deficit in invoicing: Poor invoicing practices reflects the company’s financial statements that won’t give a true and fair view of the financial position of the company.

Incompetent sources of finance: An unbalanced mix of risk capital and loan capital represents threats to the solvency of the business. If the company starts to experience financial difficulties, insufficient risk capital will only worsen the situation. The unsuitable options offer to experience financial difficulties, insufficient risk capital, existing loan capital prevents raising further debt finance.

Poor debts: The bad debts may increase significantly due to insolvency or disappearance of a customer. The in-house credit collection management undertakes regular credit control activity and follows up matters of going concerns.

External causes of business failure:

Strict governmental measures may affect specific sectors of business activity and impose the stringent burden on SMEs.
A bankruptcy of Main Customer or Supplier