We like to think that business is all about innovation, that successful management is all about making sure the employees and the customers are happy, and that the main reason an enterprise grows is because of its reputation and ability to satisfy needs and desires. There is, of course, a lot of truth to this, but unfortunately, that’s not the whole story.
The number one reason a business stays in business is because of a successful cash flow – it’s sad but it’s true. It’s not something many people want to talk about, and perhaps that’s why it’s often misunderstood. Have you ever wondered why most businesses go under, and how you can avoid it yourself? Here is a list of options to consider for boosting your business cash flow.
Creating a system
In theory, it all sounds very straightforward – a system would simply note down how money is coming in and how it goes out. However, cash flow problems can arise under different kinds of circumstances, and often they are unforeseen. Creating a system that works well may involve getting credit options or using invoice financing, researching lenient or different invoicing terms, and exploring other options to ensure your cash flow stays on a positive track.
Staying in the positive
Often cash flow problems can be avoided by actively forecasting and planning for different scenarios. If you find that your payments are late, you may have to consider various options. Generally speaking it is wiser to take a lower amount sooner; otherwise you may end up juggling different accounts whilst you should be spending time focusing on the core activities of your business.
It’s often the option that SMEs think of first, but it may not be the wisest decision; consider factoring or invoice finance first.
This is the most common form of invoice financing; where you sell your invoices at a discount to collecting agencies, boosting your cash flow. This too, needs to be treated with caution.
It’s generally preferred since invoices can be sold individually rather than in bulk.
If these options are not available, remember that you may also avail of selective invoice financing; it works in a different way, and usually allows a lot more flexibility because the enterprise keeps full control of the invoicing itself, as confirmed by central London accountants like GSM & Co. The percentage fee that is charged is usually higher (because the risk to the partner company is higher), but that also means your risk is lower and hence you are in a much better position to plan your finances. It’s all about creating the right system and taking action – action that works best for you and your company. Be innovative, and stay on top of things. Good things are bound to happen.
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