Cash flow truly is king in business and without proactive approach to active cash flow management businesses will not survive.
When you have a healthy cash flow, you can easily pay bills, pay suppliers and vendors, pay your staff’s wages and manage operational expenses. All that means your business can thrive and stay competitive. It can also do wonders for improving your customer and vendor relationships, which could help you improve contract terms and retain high-value customers. That puts you on track to grow and scale your business long-term.
Of course, there’s a cyclical effect between receiving and sending payments. If you don’t have cash coming in when expected and regularly, then you can’t properly plan for cash going out. Late payments from customers are not only frustrating and inconvenient, but they can also directly affect your ability to make your own payments on time, which can make or break your reputation as a business. The less reliable your customers are, the harder it is for you to meet your own financial obligations and the more likely you are to fall behind on payments. The data supports this: According to a study by U.S. Bank, poor cash flow management is the reason that 82 percent of small businesses fail. To make matters worse, three in 10 US small businesses believe late payments affect their ability to keep their companies open for business.
So, that brings us back to this report and why it’s so important that you review the data. If you’re in talks with a potential customer, you’ll definitely want to look at this data to understand their payment behaviors and determine what level of risk the customer could pose for your business. For example, you can see how many invoices have been paid, how many are outstanding and how many days beyond terms (DBT) invoices were paid.