Cash is King; Keep it Flowing

Every year, many profitable businesses will learn, very painfully, that cash is king. When people create their business plans prior to starting a business, many underestimate how much positive cash flow they really need in order to keep their business running through difficult periods. It is important to take into consideration, that even the smallest enterprise could experience difficulty unexpectedly. When large businesses use small suppliers, they don’t always pay for their products or services in a timely manner. Many times, this can put small or medium sized enterprises into a financial bind. Regardless of money that is late, or that may be coming in the future, businesses need cash on hand to pay the bills when they are due.

Some small businesses can find themselves stuck in a routine of borrowing money for much longer than anticipated in order to meet cash flow needs for the moment. By failing to anticipate these difficulties, businesses find themselves in a negative cash flow situation and end up spending more and more profits on interest rates, just trying to stay afloat. Not only does it impact their immediate cash flow, but it can cause them to be late with payments because of it. When this happens, it can cost them with higher interest rates in the future as well. It just goes to prove, even more so, that cash is king in any business.

For larger businesses that are usually more established, they use holding out on paying their bills to smaller and medium sized companies for their own benefit. If it will help them to keep their own interest rates low, or give them more cash flow for their own purposes, many will take that advantage. This vicious cycle will play out many times, which may result in the need for the smaller businesses to raise their prices to compensate for the negative cash flow. Often times, this practice can cost smaller suppliers their businesses if they can’t get a handle on it quickly.

Thankfully, there are ways to deal with the slow or late payments. Rather than breaking down and hiring a full time CFO to handle the accounting for the business, which most businesses can’t afford, technology steps up and fills the need. Because cash is king, there are now companies that offer virtual CFO’s for hire. These CFO’s can be hired on an as needed basis and can help any business get their finances back on track in a few short hours per week. They can help any business to set themselves up to maintain a positive cash flow, so they can face the needs of the business as they arise.

As well as virtual CFO’s, there are new smartphone apps that have been created to simplify the billing and payment process for businesses. With the help of these apps, many small businesses can easily keep an eye on their invoices and payments. They not only allow the customer to effortlessly pay in a few seconds, but they allow the smaller companies to stay on top of the late payments as well. Any small or medium sized businesses would be wise to take advantage of these ways to manage their finances before they find themselves in a negative situation.

This post was written as part of the Nollett Business Solutions blogging program, which provides businesses with the tools, expertise and solutions they need to become dynamic engines in an ever-changing world. Like us on Facebook. Follow us on Twitter.