Businesses falter when cash flow is restricted

March 29, 2012
Businesses falter when cash flow is restricted

Lifeblood, oxygen – experts use a variety of terms to stress the importance of cash flow to the future success of a business. If an organization does not ensure that it is receiving payment in an efficient manner, its development could be significantly curtailed or even stalled entirely.

For this reason, experts advise small business owners to take a myriad of steps to ensure uneven cash flow does not undermine a company. For longer term projects, organizations may want to request that customers make milestone payments throughout the process, instead of waiting until the conclusion of the service to receive payment. Having that cash-on-hand will benefit a business significantly.

For one-time purchases or short-term sales, experts recommend that organizations encourage their customers to pay up-front and quickly for products or services. This may force a business to provide customers with an incentive to pay early, perhaps in the form of a discount, but receipt of that payment is more critical than the money lost through a reduced cost.

“Once you give up your final service or product to the customer without payment, you ultimately are giving up your leverage. Don’t lose your leverage,” author Scott Gerber said in a video for “Make sure that you find ways to retain as much ownership over your final work product until the payment goes through.”

Once an organization solves the problem of uneven cash flow, it should expect funds to roll in on a continual basis. While this surely is to a company’s advantage, it could also overwhelm their finance department and produce accounting errors if financial professionals are unprepared for such an influx of information and money.

To ensure that financial departments operate smoothly, companies may rely on corporate and finance recruiters to find real quality applicants for these positions, from CFO down to accounting staff members.

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