What is cash flow and why is it important to my business?

Cash flow as a general expression may be used differently depending on circumstances, and certain cash flow definitions may be adapted by analysts and accountants for their own use. For our purposes, cash flow is an accounting expression that refers to the amounts of cash being received and used by a business during a specific period of time or on occasion tied to a specific task. Cash flow basically means "Do I have an adequate amount of cash on hand to cover my expenses?"

Cash flow is king regardless of what product or service you offer; it is the life force of any business. Hopefully you're positive of the worthiness of reviewing your cash flow - but how do you keep it strong? Make sure that your cash flow doesn't require certain invoices being paid when due. A correct cash flow projection can signal you to trouble well before it hits.

Reviewing your cash flow

This is especially vital in the early days of your business. If you know you can subsist when things aren't going well, then you know you'll be celebrating if the best-case scenario comes about. When planning the short or long-term funding needs of a business, it is more vital to predictthe likely cash requirements than to predict profitability, etc. Don't forget that more companies go bankrupt for lack of cash flow than for want of profit.

Why should I think about opening a accounts receivable factoring line to improve cash flow?

Let's be truthful, accounts receivable factoring should not always be your first choice to improve cash flow. If you can get your patrons to pay on time, early or even COD that is the ultimate solution. Besides getting customer to pay on time, you may also want to think about getting a bank line of credit. Bank lines of credit are typically less expensive than a accounts receivable factoring line, but don't offer all of the additional features that a accounts receivable factoring company can provide. Banks want to get their payments on time, but don't assist you in any way in operating your business more efficiently.

Good accounts receivable factoring companies should be looking over your accounts receivable on regular basis. You will be notified when invoices are going unpaid or when your accounts receivable aging is starting to look bad. Many accounts receivable factoring companies will even make calls to confirm your invoices and verify that the payables department of your client has received the invoice and plans to pay it on time. When you consider these benefits compared with the cost of hiring a receivables clerk, the cost of accounts receivable factoring doesn't look so bad.

Business accounts receivable factoring can be especially effective when used in conjunction with a bank line. Some accounts receivable factoring companies can work with your bank to give you the best of both worlds. Your business can have the low over all cost of bank financing AND the flexible cash flow of a business accounts receivable factoring line.

In conclusion, you should recognize that many profitable businesses go bust due to poor cash flow planning. Having a accounts receivable factoring line may be just what the doctor ordered.

If your business is experiencing short-term cash flow issues or needs to fund rapid growth, you may want to consider using our business accounts receivable factoring services. Please visit our website at