Home » Wave » Accounting & Bookkeeping » Don’t get treated like a bank by your debtor- The Art of getting paid on time
Table of Contents
ToggleWe need navigation through the cash flow cycle to keep a tap on the behaviour of ‘accounts payable’ and ‘accounts receivable’. These two main components determine the proper flow of cash in terms of income and expenses. Also, you determine the profit factor of business by the speed with which the cyclic movement of cash flow takes place in business finance. The earlier two deterministic factors in a cash flow cycle will give a clear picture of the actual scenario of the financial functioning of the business.
Less cash flow can create turmoil in the business and affect the smooth functioning and the profit of the business if ignored or not detected at the right point of time. Less cash occurs when the expenses exceed sales. Even delay in funding sources and late payment by default customers can have a great setback in the business cycle. This will then ultimately leads to its depletion that is termed as ‘less-cash flow’.
‘Prompt payment laws’ provides ways to ensure smooth functioning of small business. They make an agreement between the suppliers and business owners for timely and reasonable payment conditions. This helps in maintaining uniformity and a fair payment facility. It will help small businesses to function in a controlled and allowed environment.
Small business entrepreneurs should opt for automation tools like a payment facility. In particular, it is crucial for the running of a business which has limited resources and cash flow.