Are you paying enough attention to your cash flow?

Cash flow is the amount of money coming into a business minus the amount of money going out. It is a deceptively simple concept that is far too often overlooked by small to medium sized businesses.

Cash flow is the blood that circulates throughout your company, it delivers oxygen to the extremities and keeps the heart pumping. Money comes in from investors, sales, and other sources and flows out when buying inventory, paying staff, and taking care of other business expenses. Without a consistent cash inflow, the cash outflow inevitably drains the company over time.

Cash flow is integral to determining the net present value of a company. Calculating weekly cash flow can be used to predict future cash flow from which the overall value of the company can be extrapolated. Using this model, businesses can make long term strategic decisions, as well as short term corrections.

Cash flow determines value

When cash outflow is greater than cash inflow, then the value of the company decreases. When cash inflow is high relative to outflow, then the business is worth more. Increasing future cash flow is integral to building the value of any business long term, but there are also important short term applications including:

• Servicing creditors
• Paying shareholders
• Informing bonus structures
• Reinvesting into the business itself.

Perils of ignoring cash flow

Despite the uses and benefits of a net positive cash flow, the concept is not applied across the board. In the late 1990s, many tech companies eschewed the net positive cash flow model, relying instead on investors who were all too happy to jump on the tech bandwagon. When the bubble burst the companies went under and pulled their investors with them. Webvan, a food delivery company is endemic of the tech industry’s problematic cash-adverse philosophy. According to Bloomberg “in 2001, Webvan drove off a cliff into Chapter 11 only 18 months after its IPO, due to rapidly disappearing cash reserves.”

Optimal cash flow

A low or negative cash flow current ratio is bad, but so too can be a very high cash flow. Money flowing into a business in large quantities with minimal expenditure means that there may be a lack of investment in the company itself. Exactly how much of your cash flow you should reinvest in your business is up for debate. According to Entrepreneur, some experts suggest that small businesses reinvest as much as 50% of their positive cash flow.

Underinvestment is as dangerous as over expenditure because it means that the company is stagnating. Increasing cash inflow allows businesses to make crucial investments which grow their business overtime, increasing future cash inflow. 

For small to medium enterprises (SMEs), maintaining optimal cash flow is critical to success. According to financial technology experts Daily Fintech “A survey of 1000 British SMEs, conducted by invoice finance provider Hitachi Capital, found that improving cash flow was key to unlocking growth.” In fact, the survey showed that cash flow was so important to these SMEs that “each quarter it was included as a top three consideration for business owners, alongside reducing overheads and market expansion.”

When cash flow is overlooked

Cash flow is one of the most important, and undervalued aspects of a business. It determines current and future value, and dictates reinvestment back into the company. Striking the right cash flow ratio is vital to success now, and in the future.

Steps to take to optimize working cash flow:

• Asses your current cash flow by calculating expense versus cash inflow. You will have to make some judgement calls, but remember it is better to be more conservative and underestimate cash inflow, than to find yourself short of working capital later on due to a faulty model. Different businesses calculate their cash inflow in different ways. The Wall Street Journal reports that Procter & Gamble refer to cash flow as “free cash flows”, and PespiCo calculates “management operating cash flows”
• Focus on cash inflow and reducing long term debt during challenging times
• Reinvest your net positive cash flow into expanding your business or making it more competitive
• Create internal processes for striking the right balance between net positive cash inflow and reinvestment. Many businesses set aside a certain percentage of revenue to pursue future initiatives. This may mean prioritizing growth over profits, bonuses, or other non-core expenditures.

At JD Factors we specialize in helping businesses get a handle on their cash flow. Contact me today for help solving your cash flow issues and for financially viable options to reinvest in your business.

Ca$h now, worry NEVER!!!

What if I told you that you could grow your business by adding new customers and never have to worry about them paying?

The answer is simple. J D Factors, will credit guarantee all approved invoices eliminating ALL risk you may have dealing with customers you have no previous payment history with. We will deal with your customers that routinely pay late or take too long to pay. You are able to pick and choose what customers you want us to handle. Here’s the best part, if your customer doesn’t pay for your invoice you don’t have to worry about chasing them down for payment because J D Factors assumes all the RISK of non payment! We have already paid you for the invoice! We take the loss not you if a company goes bankrupt or closes their doors!

By using our programs you can offer your customers longer payment terms. This normally includes a spike in sales and market share increasing the profitability of your small business. Also by using our programs you will have more cash on hand for:

• Day to day expenses, as well as unexpected expenses.
• Taking advantage of purchase discounts for large orders by having cash on hand

Get cash for your business, without adding debt. Convert your assets into cash and never worry about being paid by customers again. Leave the work and worry to J D Factors and let us help grow your business.

If you are interested in learning more about our customized programs please reach out to me via email chernandez@jdfactors.comon twitter @cash_4_AR or directly 289-242-3178

I welcome any questions or concerns and your  feedback is appreciated.

Christian

"my customers really are the best... I think"

Small business owners would like to think that their customers are never going to leave them high and dry because of the relationships they develop and the comfort level they have with their customers. They  believe they will  always get paid and be able to deposit their hard earned cash without issue or delay because the customer would never "not pay them".

However a lot of business owners ignore the warning signs of trouble from their customers such as slowed payments, ignoring and or not returning collection calls. These warning signs are sometimes ignored because they are friends, some because of a long standing relationship. While other business owners simply can't afford to put collection pressure and risk  loosing  a key account while holding on to the hope and belief that they will not be taken advantage of.

No business owner ever enters a business relationship  thinking that they will not be paid. This however is happening  more often then not in this current economic environment. Even if you take the steps to check credit references or take a down payment you are still  not guaranteed to be paid. It only takes one bad credit decision or one bad debt to sink the ship and put your small business in jeopardy.

If only there was a way someone could guarantee that you will  be paid for your goods and/or services eliminating all future bad debts forever. Luckily for small business owners there is.

Using JD Factors  non recourse factoring programs allows you the peace of mind that you will never have a bad debt again. JD Factors will not only provide you with working capital, it will provide you with the security and the peace of mind required to fully concentrate on growing your small business.

I welcome all  questions and comments. If you would like to protect your businesses from future bad debts, please contact me to learn more.

Christian Hernandez

289-242-3178

chernandez@jdfactors.com

Customers taking to long to pay? I CAN HELP

Part of growing your business, means adding new customers. Sometime those new customers don't pay the way we would hope. Their slow payments trends have a direct impact on your business. Time spent sourcing more new business or time spent on improving your own processes goes out the window, as you have to take time out of your busy schedule to make collections calls and chase your customers for money.  NOT ANY MORE!!

JD Factors, has the answer you have been looking for. Not only will we pre vet your customers to make sure you are doing business with good companies that will pay.  JD Factors will take all the CREDIT RISK, meaning if your customers never pay we will take the loss not you. We will pay you once the service is completed, and collect on your behalf, thus resulting in a few things. Most importantly you will have CASH on hand for your operating expenses, pay down debt or use it to grow and expand your business.

Let me know if I can help grow your business with strong positive CASH FLOW!

I can be reached, via email chernandez@jdfactors.com, or toll free 800-263-0664 x220