Everyone knows that cash flow is important, but not everyone can tell why. In this post, we take a closer look at cash flow using simple examples and provide some smart cash flow management strategies.
What Is Cash Flow?
The term “cash flow” refers to the balance of cash moving in and out of a business.
When a client pays you, cash comes in. When you pay expenses such as payroll, insurance, or repairs, money goes out.
You always want to have a positive cash flow. In other words, you always want to have more cash coming in than it goes out. In the next section, we’ll see why this simple principle is crucial.
Why Is Cash Flow Important to a Business?
It’s simple: just imagine what would happen should your business go out of cash.
Let’s say that you get a big order worth $50,000. That’s great news, no doubt. However, you extend credit, so you won’t get paid immediately.
Now, what happens if your cash reserves dry up? You wouldn’t be able to pay for raw materials, utilities, or insurance. Everything would grind to a halt even though you closed a good deal.
Factoring: a Smart Cash Flow Management Strategy
In the scenario described above, taking out a loan would be an option. But even then, saddling your business with debt isn’t always a good idea.
A smarter move in that situation would be to Factor your receivables.
When you Factor your unpaid invoices, you sell them to a company called “Factor.” The Factor pays you in advance, giving you the cash you need to run your business, and then collects the invoice from your clients in exchange for a small fee.
It’s simple, fast, and does not require you to go into debt!
ACS Factors: We Turn Your Invoices Into Immediate Cash
At ACS Factors, our mission is to help you get the capital you need to move your business forward regardless of your industry or the size of your organization.
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, YouTube, and LinkedIn and start converting your accounts receivable into cash today!