A businesses cash flow is the balance between the money that the business receives and the money it has to pay out. What many people fail to realize is that poor cash flow can destroy a perfectly healthy business in a very short amount of time.
When we hear the term "poor cash flow" we are usually very quick to associate it with a failing company. But poor cash flows frequently occur in high-growth companies where sales figures are steeply rising as well. You can also get the best cash flow management service through various online sources.
Let's take a look at an example. A small company's manufacturing costs for a certain product are $200,000 and it has finally found a buyer for the product that is willing to shell out $1,000,000. At first glance, this seems to call for popping champagne bottles and many pats on the back.
However, what happens if the manufacturing costs are due in January but the customer will only pay for the product in May? The small business will not be able to cover its manufacturing costs and could go out of business while waiting for the customer to pay.
Small businesses are more vulnerable to cash flow problems than larger companies because they either have very little excess cash or none at all. Therefore, properly managing your cash flows should be a top priority if your business is small. Ultimately, it can make or break your business. There are several ways that a small business can ensure that its cash flows are well-managed. Here is some useful advice to help you along:
In the process of customer billing, you should do everything possible to ensure that the bills are paid as quickly as possible. If you're not already doing this, find a way to allow your customers to place their orders online or via fax.
This will help make the collection process faster. Also, don't wait to send out your invoices. Send them out as soon as you ship the goods. Always make sure that the invoice clearly states what the due date is and how much the penalizing interest is in case of a late payment.