So let me give an example from my own experience of the sort of thing that can happen. We were supplying the Federal Government with IT contractors and hit a growth period. We had an overdraft of 1 million, which generally covered payments and were pretty aggressive at chasing anything that went over 30 days.
Then everything seized up - our two biggest departments were Tax and Socials (Centrelink) and they just stopped paying. I transferred every bit of cash I could, maxxed out the credit cards and still couldn’t pay the group tax when it was due. Started getting nasty communications from the tax office, so I printed out pages of details of outstanding invoices and sent them to the Tax office with a covering letter that pretty much said “when you pay me, I will pay you”. Didn’t hear from them again. Eventually the departments started paying again and all was good. Our profit was always excellent but if you had looked at our accounts at that point, there was literally no cash and mountains of debt.
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