If you've recently created a start-up business or endeavor then understanding cash flow management and knowing when to employ a debt collector is crucial. Naturally, when you sell commercial goods there is going to be a delay between the time you pay your suppliers and staff and the time it takes to collect from your customers.
The key to dealing with this problem is cash flow management. The first thing you need to do is measure cash flow projections so that you have an idea of any potential trouble well before it arrives. Calculate your current cash on hand with the projected receivables you're counting on getting, e.g. customer payments, interest earnings, collection of bad debts through debt collection.
Next, calculate your upcoming cash outlays.
This includes, rent, inventory, salaries, taxes payable, equipment, fees, utilities, office materials, marketing costs, vehicle maintenance and cash dividends.
This includes, rent, inventory, salaries, taxes payable, equipment, fees, utilities, office materials, marketing costs, vehicle maintenance and cash dividends.
You can improve the speed of receivables by offering discounts to customers who pay bills quickly, being on top of issuing invoices and following up on those invoices, and identifying slow-paying customers and employing a cash on delivery policy for them. You can control cash outlays by taking full advantage of payment terms so you're not paying bills early, communicating with suppliers so they are aware of your financial situation, and considering vendors' offers of discounts for earlier payments so you end up reducing overall costs.