The 2 biggest cash flow challenges for growing companies

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Sanne de Vries
Written by Sanne de Vries
Sanne de Vries is responsible for the marketing at Payt. From strategic reputation management to social media marketing: nothing is off limits for her. She is ambitious and enjoys tackling new challenges with a growth mindset.

You can regularly read about companies going down despite apparently rosy figures. A shortage of cash flow is often the main cause of this. Every entrepreneur is familiar with the challenge of having money available; it is a stumbling block, especially for start ups. In this blog, you will find two cash flow challenges and how to face them!

Limited cash flow challenge #1: growing too fast in relation to available cash flow

That next big contract for your company is very attractive for growth, but continuing to close deals does not stand on its own. Rapid growth requires substantial investments; training employees, material costs and overhead. Such investments are a significant drain on your cash flow.

What do you need to understand in order not to grow too fast?

Focus on a positive cash flow. The profit of a company is not an indicator of good cash flow. A company can grow fast in profit, but this may not be enough to finance the growth. That means that you have to borrow the remaining amount. At the bank on unfavorable conditions or through factoring, resulting in unattractive consequences for your customer relationship. It is also possible in an innovative and friendly way.

Limited cash flow challenge #2: not responding fast enough with outstanding invoices

In the midst of growth, the customer relationship is often more important than making money quickly. A reminder of an outstanding invoice is then often postponed.

While debtor management is crucial for an organisation, many people have trouble asking for payment. Certainly when good reasons such as financial tightness (due to the Corona crisis, for example), the chaotic delusion of the day, and recent investments, are presented. That does not make it easier to ask for a payment in a friendly but compelling way.

Every day that your company has to wait for a payment, this entails high costs. If you do not collect the money at all, you might as well not have a bet on sales. The actual revenue collected when posting invoices at the end of the year may look very different from expectations based on invoices sent.

Do you invoice for all sales of services and products? Do you also collect all invoices and in time? How much time and money do you spend collecting invoices? A strategic approach to debtor management not only delivers payments but can also contribute to your customer relationship and customer service. And in the end, this will ensure that your company can continue to grow!

Ready to take on the second cash flow challenge? You can automate your debtor management with Payt’s smart software. You maintain a friendly dialogue with your customers and have full control over the process. Do you want to know more? Download our brochure below!

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