Factoring is a Cash Flow Improvement Tip

Like it or not, cash flow is what makes or breaks businesses today, especially small businesses. Here are several relatively simple steps that you can take to radically improve cash flow that will also result in a better managed business. You will also learn about the use of factoring and how you can use it to improve your company's cash flow.

Forecast cash flow - Budgeting and planning is well and good but don't forget to review your cash flow. You may need to hire an accountant. Do a monthly plan or if you always seem to be tight for cash, do a weekly or even daily forecast.

Develop an action plan for cash - if cash is always tight then look at how you might bring forward some payments.

Meet with a reputable factoring company to see how they can assist you with your cash flow challenges.

Invoice daily - When invoices are not paid be aware that you are acting as their banker, and that should cost them interest. Each and every time you delay invoicing is another days' worth of working capital you need to fund.

Accelerate collection efforts - sounds most obvious but so many don't do it. Track due dates, call your debtor beforehand so you can get their commitment to pay on time. You will also identify any problems and reasons why they might not pay on time and can then solve it now rather than in a couple of weeks when the debt is already overdue.

Offer a nice discount for early payment on invoices. The squeekly wheel gets greased, so it will be those that make noise who get paid when times are tough.

Be careful not to incur fines or late payment charges. Use computer reminders, overdrafts, invoice factoring, or leasing, all of which can help you manage and exploit your cash flow. These are legitimate cash flow management tools so use them

Develop a "Plan B" for a challenging time, such as what if your bank pulls your overdraft, or you cannot get additional facilities to fund that new project? Make it your businesds to think aherad and develop alternative funding sources.

Manage your company's growth. Never assume that by accepting new orders and growing you will automatically generate enough profit. Rather make sur that you assess the cash flow impact of various new opportunities.

Ask for a higher price if you will need to front expenses relating to a new contract, or ask for payment in advance. Just remember to think it through and make sure your cash flow will be pressured when accepting a new project.

If your company has cash flow issues meet with your accountant and or tax advisers to work out how much the business can afford to pay you to avoid a cash crisis.

These are just some of the many ways to improve cash flow. Do you have any additional tips or techniques that have worked well for you?


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Kristin Gabriel works with The Interface Financial Group (IFG). The factoring company provides short-term financial resources serving clients in more than 30 industries. IFG offers expertise in invoice factoring, accounting, finance, law, marketing and banking.