If you run a business, it’s always good to have accounts receivable. Accounts receivable means people owe you and there’s money in the pipeline. But while it’s better to have people owing you than it being the other way around, accounts receivable amounts to money that you can’t really use. Accounts receivable is future money that although has been promised to be paid, can’t be depended on until you receive it. Having money on the way is really of little use to a business, especially one that involves a high amount of ongoing costs like trucking, services, manufacturing, or wholesale businesses.
We all know that time is money, and in businesses like the ones mentioned it is a real issue. Take for example the trucking business where there are ongoing costs for things such as fuel, repairs, insurance, not to mention payroll. The money in accounts receivable can’t pay for any of those things right now.
Other businesses like manufacturing and services have similar needs for cash. For the services industry there is a need to have cash funds available if they want to take on larger jobs and hire more employees. There may be a need to run more shifts and there’s always suppliers that need to be paid.
Manufacturing companies need cash to buy raw materials. There may be seasonal demands that need to be kept up with which may include hiring more employees. All this increase in productivity can’t happen unless there’s enough cash to pay for it.
For these businesses and many others like them the key is having effective cash management. Knowing when that money from accounts receivable will finally be available makes can all the difference in the world. Unfortunately, there is no way to know for sure when all accounts will pay off, so unless there are large cash reserves available another solution must be found.
The solution is working with a capital management company like ACS Factors who will work out a program to make sure that cash is always there when you need it.