One of the biggest business misconceptions is that when revenues are high, your cash flow will be healthy. If you're one of those lucky business owners whose customers pay you as soon as an invoice is issued, that could be true. However, if you're like most of us, submitting an invoice to a customer doesn't mean cash in the bank__at least not yet. The challenge of waiting to be paid Especially when dealing with large, lucrative customers, most business owners find it necessary to offer payment terms in order to remain competitive. 30, 45 or 60 day payment terms are not unusual. Some require as much as 90 days. In reality, when a job is completed, in most cases two things happen: an invoice is created and the revenues are posted on the business's income statement the invoice amount becomes an accounts receivable, waiting for payment from your customer While a large revenue amount in any given month is great to compare against goals and budget, it isn't a guarantee that there'll be sufficient cash that month to cover operating expenses, payroll and other obligations. For example: Let's say that in January you completed 5 jobs totaling $220,000.00. Your payment terms are 60 days from invoice date. If you're on the ball and invoice on January 31st, chances are you won't see the actual cash-in-bank until April 1st. And, for every day that you delay invoicing, you can add a day to how long it will take to be paid. In the meantime, you're still on the hook for supplies and materials used, payroll, rent, utilities and all those normal operating expenses necessary to keep your company afloat. Cash flow is a two-way street It's also important to remember that revenues coming in are only half of the equation. It's easy to get blindsided by the amount of cash your business will need to outlay in any given month. That's especially true for large expenditures like annual or quarterly fees or unexpected costs like equipment repair. When you consider that expenses are booked as incurred__not when paid, relying on a monthly income statement to gauge the financial health of your company just doesn't cut it. Predict and plan for cash flow In addition to completing and reviewing a monthly income statement, it's important for you to predict monthly, quarterly and annual cash flow. Properly done, it will highlight any times of cash shortages so you can plan accordingly. For more information about managing receivables and proper cash flow management, visit www.accutraccapital.com.