Once you know your needs, you need to determine where the money will come from (source of funds). Don’t overlook this important piece of your business planning. Of course the idea is for your business to generate enough cash flow to pay for business expenditures plus your personal living expenses and more.
To start – list any assets and cash that you are contributing to start-up or for expansion. Show the full amount of any lease, loans, investments by partners or other investors, etc.
List funds you need to meet your personal living expenses. This will help in determining your projected cash flow each month or quarterly.
Cash Flow Projections:
One of the things to remember in preparing your business cash flow projections is you’re not trying to determine profit or loss yet, but instead the timing of money coming in and going out of your bank account.
The sales forecasts you’ve done are formulated to carry forward to your ‘Cash in’ – providing an estimate of cash in your business. This helps demonstrate any terms you may provide to your customers for payment.
example; If you agree to accept payment in 30 days, a sale in February will show up as cash to your business in March under line item “Accounts Receivable”
Cash Flow Gaps:
If at the end of your lists, you see cash flow gaps, places where you may be short on funds during a specific time of the month / year, you may need to consider alternative financing (factoring) to help cover those gaps.
Remember sales may vary during peak sales season vs low activities that can occur during slower times of your business cycle or even when vacationing takes place.
Accounts receivable is a legally enforceable claim for payment held by a business against its customer/clients for goods supplied and/or services delivered in completion of the customer’s order. These receivables are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. Accounts receivable is shown in the business balance sheet as an asset.
Factor Financing Receivables:
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.
Compare Invoice Financing Offers.. Free:
It’s recommended that you get a few competitive offers when deciding which factor finance company best fits your business financing needs. Factoring your receivables will help your business access immediate source of funds and cover any problematic cash flow gaps.
Factor Bid is a free online resource for small to mid-sized businesses. Visit www.FactorBid.com to get started comparing offers from competing finance companies to buy your accounts receivable invoices for immediate cash. No more waiting Net30 or Net45, get paid for your accounts receivables within 24-48 hours.