It's a business paradox. Sometimes, the best time for your business can be the worst time for cash flow.
How high growth impacts the cash flow challenge.
Turning down a perfectly good order from a great customer, because you don't have the cash flow to finance buying the inventory you need to fill it, is one of the most frustrating things for a business owner to do. Yet it happens all the time. Why? Because growth (especially rapid growth) eats cash flow for breakfast.
Imagine that you offer a product or service where a large percentage of your costs is labour. You've got great customers, but they insist on paying your invoices in 60 days. Your staff aren't going to wait 60 days to get paid. Nor will your landlord, utility company and a dozen other operating costs you need to keep your business afloat. Now imagine you're growing quickly and adding new customers faster than you can fill the orders. You've just multiplied your cash flow problem by 10.
The faster you grow, the more financing you need.
The fact is; many business owners find that they will stall the potential growth of their business because they don't have the cash flow to finance that growth.
High growth companies often find this problem compounded because traditional lenders consider them high risk and won't approve financing.
Growth is a good thing, and we all want it. But be prepared for cash flow with factoring.
Factoring your accounts receivable can be an ideal solution to provide you with the ready and flexible cash flow you need to see you through your times of high growth. Here's why:
Qualifying for factoring is easier than applying for traditional financing because it's based on the creditworthiness of your customersÉnot yours.
Your ability to obtain cash through factoring grows along with your business. Factoring is selling your accounts receivable invoices to a factoring company at a discount in exchange for immediate cash. The faster you grow, the more invoices you issue. The more invoices you issue, the more you qualify for ready cash through factoring.
Factoring takes away the headache of chasing receivables. One of the first tasks to break down during those crazy, high growth times is following up on receivables and collections. Yet keeping your cash flowing is critical if you're going to grow. When you choose factoring for your accounts receivable invoices, the factoring company does the back office work for you. You can spend your time where it countsÉcontinuing to grow your businessÉnot chasing receivables.
For more information about factoring and how it can help your Canadian or US high growth business improve cash flow, visit www.accutraccapital.com.