4 Ways to Ease Your Company’s Cash Flow Concerns

By Keith Tully

Effective management of a company and its finances is not an easy task, and even businesses with reliable revenues and quality clients can be critically undermined by cash flow concerns. With that in mind, here are four ways to improve your company’s cash flow:

1. Invoice factoring

Invoices often go overlooked when a company’s assets are analyzed, but there are ways in which they can be reliably leveraged to access funds. In fact, the process of selling all or part of an invoice is becoming increasingly common among businesses that find themselves, for whatever reason, happy to pay a premium in return for immediate access to cash.

Much of the appeal of invoice factoring lies in its simplicity because the process is as straightforward as one party agreeing to pay upfront for the right to receive payments due to another. For small companies with cash flow concerns, there are other benefits too, including the fact that with invoice factoring the purchasing party takes responsibility for ensuring the amounts outstanding are paid in full. Plus, factoring does not require individual directors to bring their personal finances into the equation.

2. Invoice discounting

Invoice discounting relies on much the same terms and principles as invoice factoring with the main distinction being that the process remains confidential from a company’s clients. So, if your company raises funds through invoice discounting, your clients will not find out. This does mean, though, that you remain responsible for collecting any money that's owed to you, which is not the case in the context of an invoice factoring arrangement.

More articles from AllBusiness.com:

• Can You Refinance a Personal Loan With a Business Loan?
• The Difference Between Factoring and Accounts Receivable Financing
• Working Capital Solutions: Accounts Receivable Factoring
• How the Transportation Industry Uses Invoice Factoring

3. Asset refinancing

Asset refinancing is a particularly viable route to funding for companies that have capital tied up in machinery or large-scale equipment, but which are in dire need of a cash flow injection. The essentials of the process are again very straightforward and they entail a company selling and leasing back the items it owns and wishes to leverage.

This option of refinancing isn’t right for every company, but when cash flow problems tip over from being a slight cause for concern to being suddenly very serious and potentially terminal, this option should be considered.

4. Bridging finance

Bridging finance can be accessed by companies that are in need of cash on a short-term basis in order to overcome a particular and identifiable financial challenge. A typical example would be when a business is shifting its base of operations from one location to another and is waiting to receive payments relating to a property that is in the process of being sold.

It's important to address your cash flow concerns

There are positives and potential downsides to every financing deal available to companies with cash flow concerns. What matters most is getting the right advice and fully understanding the options that are available before taking what will often be very important decisions on where and how to secure funding.

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