A strong cash flow is one of the cornerstones of a successful small business. However, the cash flow of your small business is threatened by many different situations, some of which may even seem positive at first sight. Here’s what they are and how to deal with them.
1. Growing Too Fast
Sure, growing your business is important. After all, every business owner wants their organization to grow.
However, growing at the right pace matters too. Growing too fast may end up hurting your cash flow.
How is this possible? Imagine, for example, that you take on your largest project ever. All of a sudden you have to purchase raw materials and maybe hire a couple of extra employees. You may find out that although you just closed a big deal, your cash reserves are drying up.
2. Seasonal Fluctuations
Many businesses go through seasons of high and low demand during the year.
Of course, the common-sense solution is to save when sales are high so you can navigate more comfortably the slower months.
However, this is not always possible for a variety of causes that range from unexpected expenses to overinvesting.
The bottom line is that if for whatever reason you fail to set aside cash reserves during the high season, your cash flow will almost inevitably suffer when demand drops.
3. Slow-Paying Clients
It’s simple: when your clients are slow to pay you, your cash flow slows down too.
No matter how many clients you have, if several of them fall behind on their payments, your cash flow will be affected.
This may create a situation where you have many clients on paper, but you are actually struggling to pay your bills on time.
4. Inefficient Invoice Management
If your cash flow is a constant headache, then it’s time to take a closer look at the way you manage your invoices.
Inefficient invoice management has a direct impact on your cash flow, with consequences that include:
- Invoices that are collected late or go uncollected
- Waste of resources
- Additional burden on your administrative staff
- Unhappy customers
What to Do?
As you can see, many issues can hurt your cash flow, some are external (like downturns in demand), while others are internal (like bad invoice management).
Factoring of accounts receivable can help mitigate or solve most of your cash flow problems.
When you factor your invoices, you sell them to a third company called factor. The factor pays you upfront so you don’t have to wait 30 to 90 days for your clients to pay you, and then proceeds to collect the invoice from your clients in exchange for a small fee.
Among other things, factoring allows you to:
- Accelerate your revenue cycle when you face unexpected expenses after taking on a big project.
- Get cash faster when demand is low.
- Limit the damage to your cash flow caused by slow-paying clients.
- Improve your invoice management process.
Simply put, factoring is a simple, flexible solution that gives you fast access to the cash you need and keeps your business moving forward.
ACS Factors: We Turn Your Invoices Into Immediate Cash
Looking for a Factoring company you can trust? We are located in Upland, California, and have many clients nationwide in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.
Reach out today by email (firstname.lastname@example.org) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start converting your accounts receivable into cash today!