It is a simple fact: In order for small businesses to survive, they must have cash. We all know how you get the cash to successfully meet obligations: converting accounts receivables into cash.

If there’s one thing I’ve learned during my tenure in the commercial finance industry, it is that there are all sorts of business management styles. What I mean is, there are small business owners who have a handle on their business’ financial side and there are others that don’t. Improving cash flow is on the radar for both types.

As 2012 comes to a close, we are fast approaching the holiday season. Everyone’s getting ready to do their holiday shopping, gearing up to devour all that great holiday food and watch football while regretting all that great holiday food they devoured.

Wow … I can’t believe that 2012 has almost come and gone. The thing that has stood out the most to me from a business perspective is how many companies continue to seek out small business funding. While it seems there’s some economic recovery, the one thing I can tell you is that banks are still holding a tight rein on small business funding. 

If you’re a small business that has struggled with cash flow because of slow collections on your invoices, you need to consider a factoring program. Factoring is a form of commercial cash flow funding or financing where you sell your company’s accounts receivables to a third party known as a factor.

The initial question in this blog asks, “Is cash flow financing the way to operate?” I really don’t know that there’s a right or wrong answer. Now before you skip over this blog thinking, “my business is in good shape, I really don’t need any sort of financing,” read on a little further.

As a small business owner or manager, you work hard to ensure that revenue is generated, expenses are managed well and profits are made. Along with that, you make sure your business cash flows efficiently and you are able to service your debt, pay general and administrative expenses, and make payroll. You’re running a tight ship that’s the product of your handiwork.  

Are you an entrepreneur who has started your own business and now you’ve discovered you need cash? If you’ve been reading what I’ve been writing, then you may have picked up on a theme: you need cash to run a business.

While generating revenues, managing expenses and earning profits is important, proper account receivables management is important as well. It’s a pretty simple concept: the more efficient your receivables are managed the better your cash flow. The better the cash flow, the quicker your payables are paid. When that happens, you don’t have to worry about keeping creditors at bay or making payroll on Friday because your balance sheet is strong.  

Okay, let’s say you’re a small business owner. Regardless of the nature of your business (i.e. manufacturing, distribution, etc.), there is one important thing that’s required to effectively run your business. Can you guess what that one thing is? If you guessed cash, then you’re right!