4 possible reasons your cash flow finance is bad

February 22nd, 2014


What are some of the main causes of slow cash flow finance?

All businesses need a steady stream of cash to stay in operation, and it's inevitable that cash flow finance can dry up at times.

Although using solutions such as debtor finance is the best way to prevent such problems in the first place, knowing the sources of this issue can help you remedy it quickly if they do spring up. Here are four potential causes of poor cash flow at your business.

1. Inefficient collection processes

It can be easy to point the finger at clients who are tardy in their payments, but sometimes the root of the problem can lie in your collection processes.

Is your business too slow in its collection of payments, for example? Sending out your invoices as soon as possible and offering discounts for early payments can help speed up your collections, and in turn boost your cash flow.

2. Lack of sales or leads

A poor cash flow can simply be a result of low sales and a lack of fresh leads.

Whether it's due to low seasonal demand or a general slowdown of business all round, many organisations can hit a roadblock in sales from time to time. Freshening up your marketing efforts can be one way of getting around this problem.

3. Poor inventory management

Another common cause of cash flow problems is poor management of inventory, which can lead to an excess of stock lying around - assets that can tie up valuable cash.

In addition to holding back cash that you could be using to fund your business, keeping too much stock means you run the risk of it becoming obsolete, which can land you in further trouble.

4. Being too flexible with credit

Although offering credit terms to customers can be a good way to boost your sales volumes, being too generous with credit can cause further problems with cash flow being tied up.

For example, having credit as a payment option can lead to clients being late with their payments, meaning you don't have the cash to pay your overheads, wages and other costs on time.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].