Friday, March 7, 2008


These are 7 most considered reason why we do experience cash flow problem in our business and personal finances.

1. Lack of Payment Term Discounts

Waiting for a customer to pay once you have delivered a product or completed a service can cost your business valuable money. Offer your customers a term discount such as 2% net 10, or 1% net 5 in order to encourage them to make their payments quicker to receive a discount.

2. Lack of Tracking

Tracking your business results is crucial to its overall success. Install tracking systems in the areas of your business where you can improve cash flow such as inventory management, supply ordering and procurement to reduce waste and improve turn around times.

3. Failure to Perform New Client Credit Checks

Ensure that your new clients have credit checks before your business ships out product to avoid an untimely payment or a payment default from a business with a poor credit history.

4. Lack of Credit Insurance

Failure to have credit insurance, especially when working with customers internationally, can cause the business to lose substantial cash flow if the customer is slow to pay or defaults. International customers are also more challenging to take financial action against. To learn more about how to handle bad business debts, read my article called 5 Ways to Handle Bad Debts.

5. Slow Product or Service Turnaround Times

Shorten the delivery times of your products or services to your customers to maximise the level of potential profit.

6. Taking Cash Instead of Credit

Change your business structure to where your only methods of payment are credit cards or online banking systems to decrease the wait time for business payments by check.

7. Failure to Leverage Factoring or Inventory Financing

Failure to leverage these financing solutions when your business is producing or manufacturing a product or service for a client, can cause the business to suffer a short term cash flow problem. Consider leveraging factoring for the customer's order or inventory financing for the required purchase of inventory to product their product or service to help your company's short term cash flow problem.