All companies go out of business for the same reason: they run out of cash. This does not always mean that sales or profits were down. Instead, the company simply did not have enough cash in its operating account to pay its employees and other vendor bills. This typically happens because the small business owner is so focused on sales growth or profitability that he or she forgets about cash. They reason that if the business has sales, it also has to have cash. Unfortunately, this is wrong.
The small business owner may review the profit and loss statements or balance sheets, but never take a look at the monthly cash flow statement that tells him or her if available cash is growing or shrinking.
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