Why do some businesses go bankrupt?

Question

Why do some businesses go bankrupt?

Answer 1

any businesses big or small can get bankrupt due to mismanagement, overstocking, high maintenance costs versus profits, unnecessary expenditures, poor marketing and poor market analysis, can go on and on and on.  But, if it's all about the 7% GST hike that people tend to perceive as the main contributing factor to bankruptcy, I cannot agree to this.  Because the market is a revolving economy.  If a business is to succeed and sustain, it needs to react fast to the changing market by adapting costs cutting, keep as less stocks as possible, grab immediately opportunities when come without hesitation......don't blame it on the GST or inflation....it's how you run the business...

Answer 2

Common reasons are: cash flow issue, industry downturn and cannot sustain,do not know how to market, business owner running IN the business instead of running ON the business. Most importantly, it is the lack of knowledge that is the main reason.

So if it is cash flow issue, it is because the owner does not have the knowledge on how to handle it. Next is the applied knowledge. How well you can utilise the knowledge practically.

Answer 3

Do you believe GST cause one to go bankrupt? any proof? I would rather says bad management .  Does the NKF team goes bankrupt because of GST...no way you've also read about their cases in the press.  GST is only collect by those who are register with the IRAS.  The registered Company had to do a quaterly report of GST collected and offset the difference they have incurred and the rest pay back to IRAS

Answer 4

Just 1 example you will see the picture.

Company A get a credit term of 30 days from his supplier.

Then sell it, get cash or cheque.

Use the money to pay worker, rental etc.

End of 30 days credit term, Company A may need to use money from other batch supply to pay the first.

This cycle goes on and on like snow ball.

Doing business now a days is not easy.

Not just paying the worker and rental itself only.

I believe by now you have had though of many other business expanses.

Answer 5

I had some conversation with few businessmen, mostly of them go bankrupt are those small business. SRS was one of the factors that caused these business go bankrupt few years back. Another major factor is GST.

Just an example, a small neighbourhood provision shop have to get his goods from detailers, who get their goods from distributors, and these distributors get their goods from importers. During the process, at least 3 times GST had paid, which is 21% now.

Compare to big supermarket, which can get the goods directly from importers, which meant pay only 1 time GST, which is 7%.

This mean big supermarket can afford to sell their goods cheaper by about 14%. The deceased in corporation tax is only cater for big company.

That's the reason why you can see many neighbourhood provision shops had closed down in SIngpore for the past few years.