A shortage of cash flow is the main cause of bankruptcy. Even when the numbers seem rosy, it is a challenge for entrepreneurs to constantly have money available. And start-ups in particular are struggling with this. In this article, we’ll discuss two of the biggest challenges to your cash flow. Rapid growth and expectant credit management. Of course we also share with you how to cope with them.
Growing (too) fast
Bringing in new clients, concluding that one big contract, working together with a large company. It all sounds very attractive. But growing requires investment. You have to train employees, material costs and extra overhead. They are a major drain on your cash flow.
In order not to grow too fast, it is important to focus on a positive cash flow. Profit is a good indicator of this, but despite that, a company can grow so fast that the profit is not enough to finance that growth. That means that you will have to borrow the rest of the money. This can be done at the bank against unfavorable conditions or by means of factoring. In general, this does not have the most beneficial effect on the relationship with your customers.
Another way is related to the second challenge.
Expectant debtor management
Precisely because we want to maintain a good relationship with the customer, we tend to take a wait-and-see attitude when it comes to collecting invoices in times of growth. Payment reminders are postponed and in the meantime the cash flow is visibly falling.
Many people struggle to ask for their payment. Especially if the customer provides all kinds of good reasons to postpone them for a while. Everything from the issues of the day to financial shortages can be a reason. That doesn’t make it any easier to send a friendly yet compelling reminder or warning.
But waiting for a payment comes at a high cost. Costs are added every day and if you do not collect the money at all, your costs on sales will all have been for nothing. When you write off invoices at the end of the year, the turnover actually collected can therefore look very different from the expectations based on your sent invoices.
A few questions of conscience. Do you invoice for all sales of services and products? Are you also in everything, and on time? How much time and money do you actually spend on collecting invoices? With a strategic approach to credit management, you not only keep your cash flow up to standard, but you also improve your customer relationship. In this way you ultimately ensure that you can continue to grow.
Get closer to the ball with smart software
To ensure that your customers pay on time, it is important to act quickly. If you find this difficult or you lack time, let smart software do the work for you. You automate your credit management with Payt’s software. You have a grip on the process and you keep the good relationship with your customers that you have worked so hard for.