Is accounts receivable finance the best source of funds to resolve your cash flow problems?

By: Greg de Vries

What is cash flow and why is it important to my organization?
Cash flow as a vague term may be used differently depending on environment, and certain cash flow definitions may be adapted by analysts and bookkeepers for their own use. For our purposes, cash flow is an accounting term that refers to the amounts of cash being received and spent by a organization during a defined period of time or sometimes tied to a specific assignment. Cash flow basically means "Do I have a sufficient amount of cash in my bank account to cover my operating costs?"

Cash flow is king regardless of what product or service you offer; it is the vital energy of any organization. Hopefully you're convinced of the significance of keeping an eye on your cash flow - but how do you keep it in good physical shape? Make sure that your cash flow doesn't require certain invoices being paid in a timely manner. An accurate cash flow projection can signal you to danger well before it occurs.

Keeping an eye on your cash flow
This is especially important in the beginning stages of your organization. If you know you can stay alive when things aren't going well, then you know you'll be celebrating if the best-case scenario happens. When arranging the short or long-term funding requirements of a organization, it is more important to estimatethe likely cash requirements than to estimate profitability, etc. Remember that more companies fall short for lack of cash flow than for want of profit.

Why should I contemplate opening a accounts receivable financing line to improve cash flow?
Let's be candid, accounts receivable financing should not always be your first choice to improve cash flow. If you can get your customers to pay on time, early or even COD that is the perfect solution. Besides getting patron to pay on time, you may also want to contemplate getting a bank line of credit. Bank lines of credit are typically less expensive than a accounts receivable financing line, but don't offer all of the additional features that a accounts receivable financing company can provide. Banks want to get their payments on time, but don't assist you in any way in operating your organization more efficiently.

Good accounts receivable financing companies should be looking over your accounts receivable on regular basis. You will be notified when invoices are going unpaid or when your accounts receivable aging is starting to look bad. Many accounts receivable financing companies will even make calls to confirm your invoices and verify that the payables department of your customer has received the invoice and plans to pay it on time. When you think about these benefits compared with the cost of hiring a receivables clerk, the cost of accounts receivable financing doesn't look so bad.

Business accounts receivable financing can be especially effective when used in conjunction with a bank line. Some accounts receivable financing companies can work with your bank to give you the best of both worlds. Your organization can have the low over all cost of bank financing AND the flexible cash flow of a organization accounts receivable financing line.

In conclusion, you should grasp that many profitable companies go bust due to poor cash flow budgeting. Having a accounts receivable financing line may be just what the doctor ordered.

If your organization is experiencing short-term cash flow concerns or needs to fund rapid growth, you may want to think about using our organization accounts receivable financing services. Please check out our website at http://www.btbcapital.com.

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Greg is the marketing director for a finance company and an evangelist for meditation. If your business is experiencing short-term cash flow issues or needs to fund rapid growth, you may want to consider using our business invoice factoring services. Please visit our website at www.btbcapital.com.

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