Why Your Business Needs Constant CashFlow

The ability to make critical purchases from your vendors, pay down loans, and accommodate employees has become a common problem among companies across all industries. Cash flow has always been a major problem for all businesses, and without positive cash in your bank, your business could fail. When a business realizes that their cash flow does not support their payrolls or pay suppliers, the owners make rash decisions by going to companies / banks that can ruin their business.

If you realize that your business is falling into this position, don’t panic. Review your financial situation with your accountant or CPA. But don’t act too fast. There is another possibility.

So what can you do to avoid this problem?

Before we tell you the solution, let’s talk about the 3 things you should NOT do.

1- Bank loans. If you think a bank will help fund your old or slow-paying customers, they are not.

2- Factoring invoices or receivables. Another myth. When companies rely on this method of cash flow, it just reduces your profits. Once your invoices or receivables have been billed, this “third party” who now owns them will often be so aggressive towards your customers collecting money that it can ruin your business by losing a customer.

3- Collection Agency. If all you want is someone to harass your customers, call a collection agency. The odds are that they just annoy your customers with strong arm tactics that never work, and here again you lose another customer.

What you need is positive cash flow, right? You may well have a positive cash flow and retain your customers by using a reputable company that knows how to talk to your customers in a way that will actually make it easier for them to make timely payments without losing them as a customer .

A credit management system can provide effective cash flow by trading seamlessly with your accounting department. This should NOT affect your accounting staff when handled properly. The slow-paying customers and bad debts from your accounting department must be quickly identified and presented to management in a timely manner. It’s best not to use a middleman or off-shore call. These will just hurt your business more because your customers know these types of calls that will only collect money will not help make a payment plan.

There are many articles that help find a good credit management resource. Do your research and find those who have a solid reputation and work with you as your internal accounting department.