Cash Flow Management – Time to Take Control!

Cash flow management is one of the most important and most ignored financial tools available to business owners and managers. Cash flow management is not accounting! Many business owners fail to recognize that the rules of accounting define when and how transactions are recorded in their financial statements, which is no help when they need to manage their cash for next week and next month.

True cash flow management must be based on a cash flow projection, a tool which forecasts the actual date that deposits (revenue) will be made and when, in the future, expenses will be paid. How important is cash flow? Keep in mind that businesses fail every day because they run out of cash, even though their income statement showed the business to be operating profitably.

What to do when you find yourself in a cash crunch? First, understand the factors that drive cash flow and how you can take control. The following factors have the greatest impact on cash flow:

  • Accounts Receivable (time between generating the invoice and depositing the cash)
  • Accounts Payable (time between receiving the invoice for purchases made and your payment of that invoice clearing the bank)
  • Inventory (time between paying for the materials and depositing the income from the sale of the finished product)
  • Capital expenditures (cash out to make the purchase vs. recording depreciation expense over the useful life)

Later in this report, we’ll focus on cash flow projection tools and techniques. Let’s start with some quick fixes that can get you some relief from a cash crunch.

1. Get the Money!

    a. Issue invoices quickly – Don’t wait until the end of the week or month to generate and mail invoicesb. Ask your best customers to accelerate their paymentsc. Offer rewards to customers for quick paymentd. Offer electronic fund transfers as a method of payment to eliminate “it’s in the mail” timee. Include promotional flyers with invoices – Offer perks for quick payments or to promote the launch of your new product or servicef. Require COD on future sales for slow pay customersg. Aggressively pursue unpaid invoices, i.e. one day past the due date

    • Call the customer weekly – Take detailed notes of each call and conversation
    • Involve the owner of the company – Don’t stop at the AP clerk, call the owner directly
    • Create a written collections policy and follow it, don’t be a “softy” – Define hard timeframes for action. For instance, an invoice that is due in 30 days; at 31 days, call the customer: at 45 days, offer a payment plan: at 75 days, turn over to a collections agency: etc…
    • Take legal action sooner rather than later – The longer you wait, the further down the list of creditors you may be
  • b. Restructure your invoices to define a specific date the payment is due. Your invoice should encourage action, not inaction, i.e. “Payment due June 2” is better than “Payment Due in 30 days”.

2. Hold on to your cash as long as you can!

    • a. Prioritize the payment of invoices – All invoices are NOT created equal!

      • Pay the most important invoices first
      • Minimize late fees, finance charges and penalties – Pay invoices with the highest penalties first
    • b. Communicate with your lenders sooner rather than later – Your cash issues will get worse before they get better!

      • Negotiate interest-only payments on loans for the next 6 months, without penalties
      • Never promise anything you cannot deliver, especially with your banker – if you can only pay $300 per month, do NOT agree to pay $500 per month
    • c. Contact suppliers and negotiate extended payment terms,

without

    • penaltiesd. Search for new suppliers that offer longer payment terms
    • Longer payment terms can be much more valuable than a lower price
  • e. Consolidate loans, where possible

3. Convert Assets into CASH!There are many ways to create cash from the assets of your business, some better than others. The following is a list of options for converting assets into cash:

    a. Sell off out-of-date inventory, unused equipment; anything else you have around that’s not making money

    • Pawn shops, Craig’s List, EBay, and inventory liquidation firms are just a few of the options available
  • b. Consider selling your accounts receivables to a Factoring company

    • Factoring companies will buy your accounts receivables, at a discount – You get the cash quickly, they assume the hassle of collecting from the customers
  • c. Consider using leasing companies to sell and then lease back your current assets, such as machinery, equipment, computers, software, phone systems and even office furnitured. Use the inventory you have on hand to secure a loan or line of credit.

SocialGo – Social Network Maker Review

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SocialGo is the answer for many today who wish to create their own professional-grade social network designed for their particular interest, business, or group. A social network is of course, a group of people united by their common cause, business, or interest. Thus it is a computer platform allowing users to customize their network according to the amount of privacy desired, assorted features and permissions. Permissions outline who may view personal information, or information regarded as secret or semi-secret to a company for example.

Who uses it? Various groups, entrepreneurs, and businesses utilize it. Their goal is often to being a community around their brand for instance, or to build customer meaningful relationships, or even to create a communication channel for the members of the network.

What’s special about it? Basically the fact that thousands of members have found that they can construct direct revenue streams from the network they create.

What can be in it? You can utilize this network for any text you wish to publish, as well as any photos or videos you wish to include.

What’s the difference from just a website? With this social network, people can of course read what you wish to write, but in addition they can respond to it. This allows people to become a part of the network, in that they can actually share and contribute to it.

How can one monetize this network? There are a number of ways to make money with it. For example if you provide a service, you may charge for the service. SocialGo supports PayPal for example for billing purposes. Another means of monetizing it is to host advertisements and charge the advertisers. This works very well if you have a very active network of course.

What if I need help? There are a number of ways to get help, such as joining the Owner’s Network, speak to sales agents, get a support ticket, etc. There are also a huge number of tutorials that are easy to read and follow.

What does it cost? The top of the line costs $149.99 per month, and it gives you anything that a business would need to create the best most attractive network for your brand, existing product or website. Or you can get a network starter account for only $4.99 per month. Then instead if you wish, you can get a free account if you are for instance a group of concerned mothers wishing to chat about the school your kids go to.

What else is available? There are a number of other services available, for instance sending out billing and collecting, removing all traces of the network on your site (known as white labeling), or separate storage and bandwidth blocks if you have an overly active large network.

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Ease your Cash Flow: Invoice Finance

There are several benefits that can be gained when a company decides to invoice finance. A business that deals in the sale of products or services to other businesses will receive the advantage of improved cash flow by using an invoice finance service.

Basically, to invoice finance means to sell or assign your outstanding invoices to an invoice finance company. This company in most cases will give you instant access to a percentage of the total amount of the unpaid invoices assigned to them, commonly from 70-90% of the value of approved invoices. In many cases they may also take responsibility for invoicing, chasing and collecting owed invoices as well as accept a percentage of the loss on unpaid invoices.

Having access to these funds greatly increase the cash flow within your company. Cash on hand for increased production, savings by way of discounts on company expenses, decrease or even elimination of business expenses, and improved opportunities for business loans.

By using an invoice finance service there is no waiting 30-45 days for people who pay on time, and even longer for late payments on invoices. That cash on hand can be more readily available for production, creating an immediate availability for more sales.

Another area the right business can gain greater cash flow from using invoice finance is in taking advantage of discounted payments of business expenses. Many companies offer discounts of as much as 10% if their invoices are paid on receipt or within a certain period of time.

With invoice finance you have cash on hand to pay your bills sooner, rather than having to wait until your customer pays you for your product or service. Increased cash flow also increases your companies purchase power, making it possible to negotiate better terms or discounts from suppliers. The savings in these two areas alone will in most cases outweigh the fee from the invoice finance service.

There are other business expenses that can be cut back or even eliminated when using invoice finance, for example: administration costs, stationery, and office equipment. When adding the expense of employing an accounting clerk, not only their salary but also company benefits, it’s easy to see some great advantages to using an invoice finance service.

Invoice finance can be particularly helpful to a business in the start-up phase. Most lending institutions have strict rules on lending to ‘new businesses’. A bank or lender will only consider a small portion of outstanding (unpaid) invoices owed, often only 40% of the total amount of outstanding invoices, when administering a business loan. By invoice financing your ledger shows cash on hand in place of a large amount tied up in outstanding invoices.

There are some disadvantages to using an invoice finance service. The goods or service your company supplies can have a huge effect on whether your company should use invoice finance. Businesses providing recurring services or product orders are good candidates, while invoices for one-time orders might find it difficult to obtain this type of funding.

These companies prefer to know the debtor and their track record in paying debts before accepting invoices owed by that debtor. Another disadvantage would be if the mark-up sale price of the goods or service provided were less than the amount of the invoice finance fee.

For the right business combining the improved cash flow with a reasonable profit margin along with increased sales orders the business is in a position to expand and the cost to invoice finance can easily be absorbed in increased profitability.

Converting Outstanding Bills Into Quick Cash through Invoice Factoring

Cash flow shortages can happen to almost any business, but invoice factoring can provide a quick, easy solution. Invoice factoring involves the selling of your account receivables or invoices to secure immediate working capital.

Invoice factoring lets you unlock cash that’s tied up in your unpaid invoices. Obtaining cash this way can be an easy, effective tool to solve small or medium size businesses financial challenges. Invoice factoring might be right for your business if you lack adequate working capital to maintain your operations or expand to the next level. Perhaps you’ve considered other options like bank loans, lines of credit or credit cards. But if your company doesn’t have enough financial stability or business credit, invoice factoring could be the perfect alternative to bank financing.

Here’s why: Approval for invoice factoring doesn’t hinge on your company’s credit history. Instead, it depends on the creditworthiness of your customers. Companies that purchase invoices will evaluate your customers based on their stability and payment track record. The invoice factoring company’s main concern is determining how likely your customers will pay and how quickly.

Apart from your customers meeting qualifications, your invoices must also pass certain criteria. There can’t be any existing primary liens on your invoices, meaning no other company should have a claim on the payments once they arrive. This ensures that the company purchasing your invoices has a clear right to collect the funds in your place.

Just about any company that generates commercial invoices can take advantage of invoice factoring. But is invoice factoring right for your business? It could be if your business is struggling to make ends meet because of long billing cycles, you’re wasting time collecting down payments from slow paying clients, you’re unable to take advantage of business opportunities due to lack of funds, or your business isn’t financially strong enough to obtain traditional bank financing.

Advantages of Invoice Factoring Besides providing fast access to capital, invoice factoring offers a number of other important advantages. It gives you unlimited access to funds without adding liability to your balance sheet. Because invoice factoring isn’t a loan, there’s no debt or monthly payments involved. Plus, invoice factoring is a flexible arrangement because it doesn’t require any long-term contracts.

Additionally, invoice factoring makes it easier for you to offer credit terms to customers. This can help you increase your sales without negatively impacting your cash flow. Invoice factoring also can help you take advantage of the early payment discounts many vendors offer on bills within ten days. Ultimately, invoice factoring can help build business credit. The cash flow you create from invoice factoring can make it possible to pay your vendors on time and establish a stronger credit rating. And this can assist you with securing credit from other vendors and financial institutions.

Another significant benefit of invoice factoring is the professional debt collection service provided by the factoring company. The factoring company is equipped to handle debt collections professionally and efficiently, leaving your staff to focus on core activities such as creating more sales. In addition, this will reduce your costs associated with processing invoices and handling collections costs.

How Invoice Factoring Works Invoice factoring is a transaction in which you sell outstanding invoices for immediate cash, instead of waiting the typical 30 days for the invoices to be paid. You receive an up-front, lump-sum payment for your invoices that’s slightly less than face value. The advance payment which can be provided within as little as 24 hours is typically 70 to 90 percent of the total invoice value.

After the purchasing company receives full payment for the invoice, you’ll receive the remaining value minus a ‘factoring’ fee. This fee is based on a number of factors, including your customer’s credit worthiness, the average terms, and the invoice number and size. However, generally, the invoice factoring fee is up to five percent of the invoice value.

To give you an idea about how invoice factoring transactions work, here are some of the main steps in the process:

Step 1: You submit an application to an invoice factoring company.

Step 2: After you’re approved for invoice factoring with the company, you can start forwarding your customers’ invoices to the company for cash advances. (Your customer will receive a bill from the factoring company, which will be responsible for all payments processing activities related to the invoice.)

Step 3: Assuming everything checks out, you’ll be advanced up to 90 percent of the value of the purchased invoices.

Step 4: Your customers most likely submit payments to the company that bought their invoice. This company, in turn, will forward you the remaining, unpaid portion of the invoice excluding the invoice factoring fee, of course.

When choosing an invoice factoring partner, it’s important to select the right kind of company to work with you and your customers. Here are some important considerations to keep in mind:

o What type of reputation and track record does the company have? When you turn over your customers, make sure they’re in good hands and that the factoring company is capable of providing the funding you need.

o How much is the invoice factoring company charging? Evaluate all the components of the price, including any fees, the interest rate and the portion of your invoice that is held back in ‘reserve’.

o What are you going to get for your money? Determine the company’s accounting, reporting and other capabilities.

o How will the invoice factoring company treat your clients? The company will have to communicate with your customers after they take over your invoices. You want to be sure the interaction that takes place is positive. If it isn’t, it may reflect negatively on your own relationship with these customers.

Invoice factoring is a powerful tool for companies needing to meet short-term cash flow needs.

Cash Collecting – 10 Reasons Why Electronic VS Standard Invoicing Wins

Should your business cash collecting be evolving and changing with the technology? In today’s world when everything is becoming virtual overnight, cash collecting has been moving fast towards full automation and paperless existence.

Research by leading IT analysts has found that companies with the fastest-growing profits in their industry sectors are the ones that are changing their document processes and automating them. Businesses with effective document processes in their billings and cash collecting are more likely to experience profit growth and shortening of their cash payment cycle. Unfortunately, for many businesses invoicing and cash collecting still involves manual processes. These inefficient manual steps limit the business ability to achieve objectives such as reducing cash payment cycle and increasing profitability.

Still, many other businesses have now been doing their cash collecting using the latest, fully automated document management technologies, mobile SMS messaging, e-mailing and electronic voicemail delivering. For the same reasons, many businesses have already moved to electronic invoicing and cash collecting.

This is not only a step forward in decreasing the global carbon footprint, electronic invoicing has lots of other added advantages over the standard invoicing. These are 10 big reasons why electronic invoicing and cash collecting vs standard methods always wins:

  1. Web based technology is inexpensive and easy to install.
  2. Substantial business cost reduction (E-billing results in substantial cost savings as no paper printing, mailing and posting of invoices is required).
  3. Instant delivery of invoices (your bills/invoices are being delivered instantly and you can also trace the delivery/reading status).
  4. Shortening of transaction cycles (automation shortens all steps in credit control, from invoicing to collecting).
  5. Invoices could be resent at any time (once in the system and sent to the clients, invoices could be resent at a click of the button many times if required).
  6. No filing is required (your business will save on human resources as the invoicing could be done with less staff, with no filing required).
  7. Easy access to invoices (invoices are accessed at the press of the button at any time).
  8. Significant reduction in Days Past Due (DPD is a measure of the average time to collect receivables. An automated billing system is easily configured to send regular reminders to unpaid bills. This regularity will significantly reduce the payment cycle).
  9. Anyone in your business could be trained to cash collect (using an automated system is simple and easy to use with little training).
  10. Increased productivity and profitability (with fewer manual tasks in accounts receivable, more could be achieved with less people).

As you can see above, automated document management and cash collection has the potential to deliver significant benefits as a result of eliminating document process inefficiencies within cash collection.

Landscape Contractors: Manage Your Cash Flow With Invoice Factoring

The market of landscaping comes in many forms from commercial and residential contractors, architects, grounds departments to educational institutions and suppliers. No matter what part of landscaping your business falls under there is always a need for managing your cash flow to grow. Have you been turned down for bank financing or have an inadequate bank line of credit? If so, invoice factoring may offer your business the assistance you have been seeking. In today’s instantaneous world, landscaping contractors now have access to working capital with quick turnaround. In some cases your business can immediately receive cash the day after the invoice is generated. In addition, factoring gives you a way to manage cash flow while eliminating the uncertainty of when invoices get paid. Whether you are a start-up company or a seasoned business, invoice factoring can help to guarantee your monthly accounts receivable.

In these uncertain economic times, many commercial businesses and residential property owners are stretching payments out longer and longer, oftentimes delaying payments owed for months. Because of this, many landscaping businesses need to quickly raise cash just to stay afloat. With predictable cash flow, landscaping businesses can reap the benefits of receiving their money as soon as the services or rendered goods are delivered. In addition, invoice factoring provides freedom from accounts receivable collections and allows the company to do what they do best… landscaping. Factoring companies specialize in the following:

• Often can fund your invoices the very next business day.
• Give your landscaping business steady and predictable cash flow.
• Give you access to working capital for your business.
• Can often work around IRS tax liens, personal credit issues or client concentration problems.

As a result of the above, landscape contractors now have a workable option when wanting to expand their company for future success. For example, commercial and residential landscaping businesses can be labor intensive which oftentimes require a need for large payrolls. As landscaping companies expand their business, so does the need for additional working capital to cover expenses such as payroll or light/heavy equipment purchases. By choosing a factoring company, landscaping businesses now have the opportunity to avoid asking for embarrassing deposits for job funding; fund all types of maintenance including government, municipal, commercial and residential landscaping jobs; pay cash for materials and supplies that are needed; and pay vendors on time improving credit standing. Now landscaping businesses can live with a sense of confidence knowing that they will have quick access to working capital.

It has been predicted that the landscape industry is expected to grow as much as 13% in the next five years. In order to manage this growth, factoring can provide these businesses an efficient way to manage their cash flow with predictable working capital. By offering immediate access to cash, invoice factoring companies provide landscaping businesses the ability to bring their ideas to life, expand their customer base, and grow their businesses into the future.