Cash Flow Solutions
When discussing cash flow solutions, a person must first define what definition of cash flow is going to be used. Basically, it is really a time period within a business month when a comparison is made between the money coming in and the expenses going out. Hopefully, an auditing check at any time of the month will always show a positive cash flow but that may not always be the case. For a small business owner, the reality of putting out money without enough coming in at the time to cover the expenses can be stressful and costly. Finding and implementing positive cash flow solutions can be an ongoing process for the owner of a small business whose every expense can be one step closer to closing the doors.
One of the cash flow solutions that is not known much about outside business circles is called factoring. A factor is a lender who will actually pay a company for a high percentage of accounts receivable invoices from well established customers in exchange for a percentage of the amount due when it is finally paid. Usually, factors will advance about eighty to eight-five percent of each account due. The agreement signed with a factor will be for a length of time, sometimes a year or more. This particular answer for slow cash flow issues allows a business owner to concentrate on business issues and not on worries about there not being a enough money to pay for certain expenses. Recourse factoring describes the agreement between lender and business as one in which the lender does not assume any bad debts such as non-collectables and very slow pays. Non-recourse factoring is more expensive for the company and describes the agreement that the lender will pay for defaults and disappearances but not for slow pays.
A second of the cash flow solutions available for the small business owner is the purchase order finance agreement that can be made with certain lending groups. Because there are many instances when a start up business has supply orders coming in but invoices have not yet been received, a lender will pay up to eighty percent of the value of the received invoice amount. The owner then pays the remaining twenty percent plus the cost of the borrowed money and fees. This could certainly be of an advantage for certain businesses whose suppliers want cash on delivery while the business's customers are looking for a thirty to sixty day allowance for paying their own invoices. The Bible warns against believing that the sun will always come up tomorrow for us personally. "Whereas ye know not what shall be on the morrow, for what is your life? It is even a vapour that appeareth for a little time and then vanisheth away." (James 4:14)
There are also a number of cash flow solutions that may not cost a business a lot of money that can make a palpable difference. Consider the idea of stretching out payables from thirty to sixty days by negotiating with suppliers for more buyer friendly terms. Perhaps doing credit checks on customers before doing business would be a good way to separate the slow payers from those who have a history of paying on time. There are very good reasons for offering incentives for customers who pay within ten days; incentives of up to two percent off the bottom line would make both the customer and the business happy with fast turn arounds in the accounts receivable department. A proven, tried and true cash flow solutions idea is the cutting back on inventory. Twenty thousand swim goggles on the shelf in October at the flagship store in Fargo is a bad deal even if they were half price when bought. So are a thousand pairs of snow boots on hand at the retail outlet in Jackson, Mississippi anytime!
Some businesses have even gone to an inventory on demand concept, bringing in supplies as the orders arrive. But the granddaddy of all cash flow solutions is the idea everyone leaves for the last resort. Raise prices. Ouch, ooh and yikes! But simple economics may dictate such a move.
Increased or better designed advertising may be one of the cash flow solutions that can make an impact on one's business health. A fee paid to an advertising consultant could be a wise investment when sales seem to be flagging. Perhaps balloons on the mailbox out front or a clown with a sandwich sign aren't as effective as first thought. Seriously, so many exciting ways are available today for businesses to advertise more effectively and at lesser costs than in the past and each one should be explored to pump up the cash flow.
Finally, these question of whether a business is able to accept checks by phone, fax and online can eliminate the "check is in the mail" ruse. Since ninety five percent of the time the used car salesman is more honest than that remark, being able to open the floodgates by saying that checks are now accepted by phone or fax or online can make a huge difference with those bill payers prone to dragging their feet. The bottom line to finding a solution for this ongoing problem for so many businesses is a thorough examination of how commerce is being conducted. In many cases, bringing in a cash flow consultant may be the best solution of all for personal, one on one questions and answers.
Cash Flow ProblemsCash flow problems cannot always be avoided as they are simply a single part of many factors that affect a business or organization's overall financial health. The flow of monetary holdings is measured by the entirety of a company's financial assets and not just the amount that is earned in profits. At one time or another, almost every business will experience some sort of lull or financial frustrations. Those related to the flow of funds are especially problematic as such is what keeps businesses and organizations running, basically the exchange of monetary assets and holdings are the 'life's blood' of an organization.
There are several tips for people to take into consideration in order to help make it through during times of cash flow problems which can lead to larger frustrations if those who run a business are not careful. Over time, ebbs and flows are natural processes to a business that is consistently active. Lulls and low points in funds can and should be expected, however there are actions that should be taken during slow periods. For example, when companies face low times of cash flow problems and there is not enough funding to pay the bills, people can be tempted to put off the bills until accounts are built back up again. Experts in the field caution people against the decision to delay payment and suggest that the entirety of whatever bills are due should be paid in full as quickly as possible.
Situations in which people feel the need to delay payment should be avoided at whatever cost, as the act of delaying could lead to potentially complicated lawsuits which will only lead to further cash flow problems down the road as funds are replenished. The best way to avoid situations which can lead to further upsets is to have a well thought out financial plan with realistic goals. A plan can help to avoid periods of frustrations, however there are times when cash financial frustrations simply cannot be foreseen or avoided. If such a situation arises, a level head can make all the difference. Wise choices based of knowledge gained by experiences are vital to the success of any business or organization and can make all the difference in times of crises. A person should notify all who are expecting payments and make an effort to come to terms with the situation or any possible solutions.
People should get into the habit to consistently check accounts and the status of assets so as to be aware when inflow does not match the outflow. Companies occasionally spend more than is earned either unintentionally or unexpectedly. For example, money is lost of a sum is spent on upkeep for equipment, and then in a period of time only have the amount spent is regained by profits. Cash flow problems can lead to even greater difficulties if those involved do not take the proper actions necessary to amend the situation. First of all, those who experience a lack of funds should not hesitate to ask for help. For many the act of inquiring into assistance can be difficult or impossible as owners would believe it would be a sign of weakness if word got out about the situation. Pride should be put aside as more important matters are to be dealt with.
After inquiries have been made into assistance, thought and consideration should be spent on how the situation arose and what steps are needed to ensure that history does not repeat itself. Many times the reason for the unbalanced funds during periods of cash flow problems are due to circumstances outside the control of business owners, such as the economy, financial crises and so on. After an idea is gained on the problem, those who run the business in question should take a long hard look at the current finances, at all the records, notes and statements. The problem could be helped by some simple restructuring of assets and management of finances.
Once assistance has been sought and any relevant matters have been attended to, those responsible for the company must get word out to all the creditors who expect payment. Often, people in situations which result from cash flow problems higher an accountant to assist as the financial world can be quite confusing. If a person is set up with an accountant, the expert can contact any and all creditors with all necessary information. Contacting creditors is an excellent step to take as shows credibility and a good sense that can be trusted, qualities which creditors like to see in clients. Any effort that is made into building a good reputation should not be taken for granted and instead worked to full potential.
Ebbs and flows can be expected throughout the life of a business, company or organization. Cash flow problems can and should be dealt with in a rational manner before small issues can turn into larger concerns or trickier situations. Those who run a company and might not understand what is necessary to promote healthy financial situations should take into consideration the possibility of hiring an accountant. Such a move can prove to be invaluable as a person who is familiar with the field knows what to expect and can aptly suggest solutions and or ways to prevent problems from occurring. A guide in times of uncertainty can be what is needed to provide confidence in times of uncertainty, "And the LORD shall guide thee continually" (Isaiah 58:11).