If you’re reading this, your business may be experiencing a cash flow problem. Maybe you’re business could be performing at a higher level, making more money with less effort and lower stress. Are you properly managing your business cash flow? Do you see more bills that are due then revenue that has been collected? This type of shortfall can effect the health of your business and even leave you feeling angry, unsure and frustrated.
Accounts receivable represents sales that have not yet been collected as cash. When you sell your good and/or services to a customer in exchange for the customer’s promise to pay you at a later time, you’re leveraging your cash and business credit to extend terms to your customers. If your business normally extends credit to customers, then the payments of your accounts receivables are likely to be the single most valuable source of capital in your business.
What can you do to Better Manage your Company’s Cash Flow
To Properly manage your company’s cash flow, you must first analyze components that affect the timing of your cash inflows and cash outflows. By reviewing and analyzing key components within your business you can discover areas that leave cash flow gaps and may be costing you extra money from temporary solutions that don’t add up long term. Narrowing or even closing cash flow gaps for good, is the key to efficient cash flow management.
Important Components you need to Manage Include
Accounts receivable. Accounts receivables represent sales that have not been collected in the form of cash. Businesses create an accounts receivable invoice after you’ve sold something to a customer in return for his/her promise to pay at a later date. To properly manage cash flow, you must realize the negative affects caused by the time it takes your customers to pay off their open-outstanding invoices.
Inventory. Inventory management is very important and describes the extra merchandise or supplies your business has on hand to meet the demand of current and even new customers. An abundance of inventory can hurt your cash flow by using up money that could be used to grow your business.
Credit term. Credit terms are the time limits you set for your customers promise to pay for the goods and/or services purchased from your business.
Credit policy. A credit policy is the formula you use when deciding to extend or not extend credit to a customer. Your credit policy should be used to make sure your cash flow doesn’t fall victim to a credit policy that is too strict or too generous.
Accounts Payable and Cash Flow. Your business accounts payable are monies you owe to suppliers that are payable or due sometime in the near future. Net 30-45 or sometimes even 60 days from the delivery acceptance date. Without accounts payable and trade credit you would have to pay for all goods and services upfront or at the time you agree to accept/purchase them. For efficient cash flow management you need to examine your accounts payable schedule monthly.
Worst Case Scenario
In the worst case scenario, unpaid accounts receivables will leave your business without the necessary cash on hand to pay bills, employees and daily expenditures. Late paying or slow-paying customers will create cash flow gaps and shortages, leaving your business without the necessary cash on hand to cover outflow obligations.
Fixing the Gaps in your Cash Flow cycle
Looking into partnering with a factor finance company will help dissolve any cash flow gaps. A factor is going to provide you funds within 24 hours of invoicing your customers, closing out any shortfalls or outstanding payments that are due.
The Factor finance company resumes the responsibility of collecting payments from your outstanding receivables so you can focus on running your business and generating new accounts to help drive more growth.
Accessing cash with 24 hours of invoicing customers can help define your predictable cash flow each month. You’ll have a good understanding of how much money you have on hand for purchasing, investing and efficiently operating your business. You’ll be able to reach benchmarks you’ve set faster, accept new customers with no hesitation and manage existing customers more efficiently.
I want the Best Factor Finance Company, Help me find one
All Factors finance companies are different. Some specialize in specific industries and are able to offer competitive rates within their fields of expertise. If you present your invoices to a factor that does not specialize in your specific industry, but may still be willing to help finance your invoices, you may not be getting the experience and best deal you could receive with a factor that better understands your industry. You don’t want to be the guinea pig in a factors attempt to wing their way through trying to finance invoices in an industry like yours that they know nothing about.
That’s where Factor bid comes in. Factor bid matches your business with the top factors in your industry, while getting you a few competitive offers at the same time. When factors compete for your business, you win! You’ll get the knowledge and leverage you need to negotiate the best deal with the right factors that specialize in financing invoices in your industry.
Factor bid is a free small business resource and only takes about 2-3 minutes to get you started in receiving competitive offers from the top factor finance companies. Get started today by visiting www.factorbid.com
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