Careful cash flow planning in the present economic climate is important and making sure your customers pay you on time where you are a credit type business is imperative.
Where the payment of your invoices is pushed too far ahead in to the future, you will begin to lose the benefit of any profits made on the business you do and of course your cash at bank will suffer accordingly.
One way to help cash flow if you are finding that your customer are slow at paying is to use invoice discounting or factoring. With this you get the payment from the factoring company at the time of invoicing, which will make a huge difference to your cash flow. However, like any type of financing, thee are costs associated with them and with factoring or invoice discounting you will pay the discount house a fee on the invoices that are factored, plus an interest charge on the money advanced to you.
Planning forward for your business is also important, to work out how to afford expansion plans if that is what you are doing and to work out timings of payments and receipts to the business. However, it is important to stick to your plan as far as possible. When you are making these plans, the use of factoring or invoice discounting in financing your expansion can be reviewed using cash flow forecasts.
