This article are provided for information purposes only, and are not intended as legal advice.

Businesses with cashflow in troubled times

June 22nd, 2009

If your business is struggling and clients are paying slowly, what do a lot of companies do?  They dip into trust money, the amount that is collected from customers but belongs to the government – i.e. sales taxes or the source withholding of your employees salaries and wages.  Although this is a short term fix, you are playing with fire. Look to sell part of your business or see if you can get a bank loan.  The government agencies realize that times are tough and they are monitoring how much is collected on these taxes.  They tend to be more aware of the situation now than ever in the past.  They are trying to protect their revenue and are fast to move in on the company.  They can freeze your bank account, they can remove all the funds out of your bank account before you realize it.  They can find out your customers and send a letter of direction to them to pay off the government debt.  This is terrible, now all your customers know you have cash flow problems, will they start to look for another customer in case you are not around much longer? Dealing incorrectly with the government can have an impact with your customers therefore do not think that borrowing from the government trust money will help you out in the long term.  You will be caught sooner than later and then if the numbers/borrowing is too large, it may be difficult, it not impossible to escape and get back on to proper footings.

Filed under: Business strategies — Gary Landa @ 9:28 am

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