It is often read about companies that go under, despite seemingly rosy figures. A lack of cash flow is often the main cause of this. Every entrepreneur is familiar with the challenge of constantly having money available; especially for start-ups, it is a stumbling block. Here you will find two cash flow challenges and how to tackle them!
Limited Cash Flow Challenge #1: Growing Too Fast in Relation to Available Cash Flow
That next big contract for your company is very attractive for growth, but closing deals does not stand alone. Rapid growth requires substantial investments; training employees, material costs, and overhead. Such investments put a significant strain on your cash flow.
What should you be aware of to avoid growing too fast?
Focus on positive cash flow. Profit is not a measure of good cash flow. Despite profit, a company can grow so fast that the profit is not enough to finance the growth.
This means you have to borrow the remaining amount somewhere. From the bank under unfavorable conditions or through factoring, resulting in unattractive consequences for your customer relationship. It can, of course, also be done in an innovative and friendly way.
Limited Cash Flow Challenge #2: Not Staying on Top of Outstanding Invoices
In the midst of growth, the customer relationship is often more important than quickly securing the money. A reminder of an outstanding invoice is often postponed.
Although debtor management is crucial for an organization, many people find it difficult to ask for a payment. Especially when good reasons such as financial tightness (due to, for example, the coronavirus crisis), the chaotic hustle and bustle of the day, or recent investments are presented. This does not make it easier to ask for a payment in a friendly yet firm manner.
Every day your company has to wait for a payment incurs high costs. If you don’t get the money at all, or if you leave it out, you might as well not have focused on sales. The actual collected revenue can look very different at the end of the year when writing off invoices than the expectations based on sent invoices.
Do you invoice for all sales of services and products? Do you also send all invoices on time? How much time and money do you spend on collecting invoices? A strategic approach to debtor management not only yields payments but can also certainly contribute to your customer relationship and customer service.
And ultimately, this will ensure that your company can continue to grow!
Ready to tackle the second cash flow challenge? Want to stay on top of outstanding invoices but don’t have oceans of time available?
With Payt’s smart software, you automate your debtor management. You maintain the friendly dialogue with your customers and have full control over the process. With the help of cash allocation, you can improve your company’s cash flow and keep your business healthy. Want to know more? Download our brochure now.
