Closing the cash flow gap the easy way

When the money at your company is getting tight and you find it challenging to pay your vendors and others, it will cost you a lot of money to ask a lender for a loan. Lenders see businesses that are struggling and they will offer you the money with a high interest rate or they won't offer it at all. Borrowing money to fix your cash flow can be potentially dangerous to your company as it can take years to pay back and there is no real way to ensure your customers will pay you on time. Instead of looking for loans to try and close the cash flow gap all the time, you need to look into some alternative ways to bring in the money you need to stay afloat.

Change your credit policy
Never ever offer credit to a new customer. You have no idea what type of borrower they are and there is no way to tell if they will pay their bills on time. Only offer credit to your customers that have been loyal to your company for many years and always run a credit check on your customers before offering them credit. This is the best way to protect yourself against fatal accounts receivables as you know the people that are borrowing money are those that can afford to repay it in a timely manner.

Accounts receivables factoring
If your cash flow is terrible due to customers that just can't seem to pay their bills on time, you may want to look into accounts receivables factoring. This will allow you to sell off your invoices for cash now, so you aren't stuck waiting weeks or months for your customers to pay. The downside is that you won't be able to acquire the full invoice amount; just about 85-90% of the total invoice amount will be paid to you. Even though it's a lesser amount, it's still a better option than looking into a line of credit that may not do anything for your business besides get you into more debt.

Speed up payments
To get your customers to pay their accounts on time, take action against their accounts. Start requiring customers to make a deposit on their account at the time of sale and then ask them to pay the other half of the invoice within 30 days or less. Offer them multiple ways to pay along with payment plans in order to get them to pay your company. Take a lesson from credit card companies and enroll your customers in an automatic payment method where they are billed the same amount every month until the account is paid off. It's a great way to ensure you will be paid do what you can avoid losing money waiting for your customers to finally pay their invoices.

Arrangements with vendors
While you wait on your customers to pay you, it hampers your ability to pay your vendors. Talk to your vendors and try to work out different payment arrangements with them. If you can get an extra 10-20 days on your payments, it may be just enough time that you need in order to collect the money from your customers.

Reduce your business expenses
Just like your personal finances, you want to try and cut out all of the unnecessary expenses that you may have. Reducing your expenses is a great way to ensure the business will continue to run properly for many years. It will help you reduce the financial burden you may be feeling on your cash flow so you can finally breathe again.