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Your company already has all the cash it needs!

Guest post by: David Banfield

Article Overview: Unlock assets to finance your business-don't borrow!

Your company already has all the cash it needs!

Your company already has all the cash it needs!



If as a small business entrepreneur you have just been rejected by your bank for either a line of credit or an increase then you would probably argue with the statement above.

In most cases however the statement is probably true. Most companies usually have sufficient cash assets to meet their daily needs and in many cases enough to meet their growth needs.

As a manufacturer or service provider once you have ‘delivered’ your product or service you have a significant cash investment in that transaction. Your investment comes in many different forms such as inventory, labour costs, packaging, marketing, etc. All of these components have probably already been paid for by you-especially the labour content.

Regardless of whether you are a manufacturer or service provider at the point that you issue your invoice you have created an investment for your business. Unfortunately that investment wont solve next weeks payroll problem or other accounts payable demands. With a slow economy your customers are almost certainly taking advantage of your credit terms and stretching out ‘net 30’ as far as they can. Such action probably forces you to do the same with your suppliers. Unfortunately where the payroll is concerned there is no stretching possible.

The invoice that you created is, as we say an investment and the key is to unlock the value of that investment and turn it into usable cash flow. If your business was 100% ‘cash on delivery’ you would not have any cash flow issues-therefore the key to your cash shortage is simple-turn your business into a ‘c.o.d’ business. Simple-maybe not as it would require all of your customers to agree and make immediate payment to you.

The solution is to use an intermediary that can turn your business into a cash business without it having an impact on your customers and your relationship with them. Through the medium of invoice discounting your quality, current accounts receivable-those invoices that represent your investment-can be turned into instant cash.

Invoice discounting is a mature financials service that in many instances can be geared to the specific needs of smaller growing companies. You DO have all the cash you need-you just need to know how to unlock the investment

David Banfield

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Article Tags: cash flow, david banfield, factoring, invoice discounting, small busienss help



Related Forum Posts
Bright future who start early - You are at a pivotal point in your life. You may not realize it, but your mindset is great. Most kids your age are thrilled to get an under appreciated job working for some company to make a little spending cash. However, those who look to get into the business side early in life are usually the ones who become successful. What you do now, might not make you a rich kid, but you will pick up much more valuable experience that you can cash in, down the road. I would suggest you learn to make websites right away. It is a valuable tool that you will benefit from. You make a little cash making websites - the more experienced you get, the more money you can make. You don't need too much money to get started - seeing as you already have access to a computer. Making a website will get you thinking about business in general and it will lead to marketing, finance, and profit.
Startup problems - The first stage of starting a company is survival - do what you have to do to keep the company going until you're at a point where you can pay yourself a full salary and start bringing on extra help. If you can't get to survival and have enough cash coming in the business won't make it past the first year.
Re: Interrealtionship between financial statements - Yes, it’s necessary to take a complete toll of account transactions. If you don’t, then how would you be able to track your financial figures? For example, If a person sold goods for USD 5,000.00, half in cash and half in credit, then with taken impact of all three i.e. cash flow by USD 2,500.00 balance sheet through both cash and receivable and income/P&L statement by USD 5,0000.00, the transaction will not be complete.
Re: Cash up front ... or Royalties? - It depends, especially since the question did not include many specifics. Take the following as an example: Sometimes a product is exclusively bought/licensed by a larger company for the sole purpose of keeping it off the market. Your decision has several options: Options: 1) all cash up front 2) all royalties 3) mixed up-front cash and royalties So, in this scenario, you would most likely go with primarily cash up front since there won't be sales to generate royalties. That is one example including a little bit of criteria for making the decision. Mixed is most common. I am not learned/experienced enough at this point to have criteria for calculating the mix. I do think I have seen equations in my reading that provide guidance here. So, it definitely depends on the situation, and probably more on the business situation than than the situation of your personal life. If you are fortunate enough to encounter this dilemma, be sure to hire a professional with demonstrated experience to help aid in negotiation. Inventors tend to get greedy when they face this opportunity. Don't be greedy. Listen to your professionals. More than one person has lost it all because of greed in this stage.
Improve your Cash Flow - As we all know, the primary concern of proprietors and managers are cash flows. I would like to share some tips on how to improve the cash flow of your business. 1. Speeding up Collections - collecting receivables earlier, on or before due dates. Discounts for early payments can be one way to do this. 2. Slowing Down Payments - stretch your payables and pay only when it is due. But be careful not to mess up with your credibility. 3. Invest in Marketable Securities - use the money in Marketable Securities and other short-term investments to earn extra cash.


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