Receivables? Many of us generate receivables … but did you ever try to buy something with them?
You can if you’ve been in business quite a while and have a credit line … but that’s not for everyone now is it?
I compare receivables often times to the life of a butterfly:
- The egg to caterpillar stage is the work part
- Then we wrap it up in an invoice and get to the crysallis stage
- Now we wait for the butterfly to appear … but until it appears we haven’t got much AND there is no guarantee that that butterfly is going to appear either!
Let’s get back to the business thing: When does the cash “emerge” from the invoice?
Imagine this: You’re going to have to declare a profit to the IRS and yet you can’t pay your taxes because all you have is receivables … and your real money is tied up in them.
How about this one: You’re going to get paid by your customer in 45 days BUT you have to pay your staff and employees in 14 days and your suppliers in 30 otherwise your employees will quit and in addition to paying a service fee and interest your supplier is going to put you on COD … BUT!!! … we have receivables … good old receivables!!!
Readers: Let’s strike a balance here … Receivables are necessary thing and they are a good thing BUT we need to have a handle on how we get to the “CASH STATE” of being.
How do we do this if we have weak collateral? Marginal Credit? Minimal operating history … OOPS: These sound like those nasty questions the banks ask now don’t they? Reality: This is where we want to be going … The Bank!!!
- How do we get to become bankable when we can’t borrow?
- How do we fill orders when we only have receivables?
- How do we pay our employees when we only have receivables?
- How do we grow and take on larger customers when all we can do is generate receivables?
NO BRAINER … Eliminate offering open terms with your customers (they’ll love that now won’t they?) and go Cash On Delivery … or find a source to convert our receivables to cash until we’re big enough to go into an asset based loan or until we have enough history to become bankable.
Most importantly: The sooner a business owner admits that this is the best way the sooner they can stop turning away business and stop impacting their profits.
Why wait? All business owners search for the lowest cost of funds … and well they should … but why not sustain your growth until you find it? Invoice factoring is flexible as in you can opt in and out of agreements with relative ease … promise!
That said: Why not show growth and sales successes vs. sitting there like a lump of mud hoping the rains don’t come along and wash you away? I can’t figure it out … but I see it at least once a week.
Think on these things … and may your monies come to you on welcome wings!