Does your business connect to cash flow?

Business cash flow is the lifeblood of any business, for many understanding how cash flow impacts business success or failure take time to understand, especially if the business owner is not that commensurate with the finances of the business.

In simplistic terms as a supplying business of products or services, the aim is to keep and utilise money which the business generates and not necessarily over a long term rely on loans or other funding sources.

To be able to do this ideally the business should have a good yet simplistic system in place in regards to the purchase of goods and supplies, as well as for the invoicing out of the same.

Many local businesses incur cash flow problems due to the length of elapsed time between them being invoiced for goods compared to when they invoice out for the same goods.

An example could be that you as a small local business purchase goods for resale at the start of the month, and either at the same point or a few days later you receive an invoice for the goods.

You supply the goods to your client as soon as you have them, yet for some reason, you don’t have time to invoice out for the goods there and then - instead you wait until the end of the month when you have more time.

The time delay will cause cash flow problems, and more often than not you will be constantly chasing your tail, always robbing Peter to pay Paul.

Now, this sounds so simple, but what any business should do is invoice out as soon as goods or services have been supplied.....do not wait days, or weeks to do it....! For many, the admin bit of a business is what people hate most and as such they shy away from it – the fact is it’s the admin bit of business that keeps things in order, helping the business to live another day.

By a small business delaying in undertaking their invoicing creates needless and unwarranted stress.

Depending on the type of companies a business deals with there will undoubtedly be accountancy cut off periods for the receipt of invoices from suppliers.

Some companies will state that they need to receive an invoice for goods supplied by no later than the 5th working day of the month. With any invoice received after that date from the preceding month not being accounted by them within their systems until the following month – this can add anything from another 30 to 60 days waiting time for payment.

As a business - don’t get too blinded or hoodwinked into giving a superb service over the most important element which is that of invoicing and getting paid.

Surprisingly some businesses seem too scared of actually invoicing or even asking for money for any services, products or advice which they have given. This may be because they don’t value what they have done, or it could be that no clear lines or understanding was made in their supply, or that they are just too busy to be bothered with all the admin stuff.

A good customer is only a good customer if they pay the full amount and on time, however, you have to help and educate a good customer into what you expect and require in you supplying them with services and/or products.

If the cash flow of your business is bad, it’s not always the immediate reason for 'my customer hasn’t paid me yet, it might be just a matter of any delays being caused by your business at the start of the whole invoicing process.