How to Determine if You Need Financing and Cashflow Solutions for Your Business


If your business is the type that offers credit to your clients, then you will need adequate financial reserves in order to keep your business running and not have to deal with problems with operations. You will need additional cash on hand to bridge the gap between sending out your invoices and receiving the actual payment from your customers. If you do not have the necessary reserves of cash, this could seriously affect your business, not only in the short term, but in the long term as well.

Keeping adequate cash reserves is essential for any business, more so for those who offer credit. But if you are finding yourself having increasing difficulties with cashflow, it may be time to consider financing and other cashflow solutions (such as factoring and invoice discounting, as well as asset finance) for your enterprise.

How to know if you need financing and cashflow solutions for your business

What you have to do is assess your business and its operations thoroughly in order to know if you are a good candidate for financing and cashflow services. You need to ask yourself a number of specific questions – some may have obvious answers, whilst some may have answers that only come about through a complete assessment.

Your cash reserves and commitments

First of all, you have to ascertain how much cash you have available. Go through all your expenses every month and every quarter, and include an estimate of the amount of cash you may need for emergencies and unexpected expenses as well. Only then will you be able to determine whether you have enough reserves of cash to meet all your commitments (bills, salaries, supplies, and the like) and also address unexpected expenses at the same time.

Assess your facilities when it comes to financial reserves

Your goal is to help your business grow – this is already a given. But as your business grows, you need bigger financial resources as well. You need to determine if you have adequate facilities to resort to as your business experiences growth. If you do not, or if you fear that you may not have enough financial reserves to coincide with your business’ growth, then it may be time to rely on financing solutions that will grow alongside your business, such as factoring or invoice discounting.

Factoring is when a provider (such as Ultimate Finance) pays you a certain percentage of your invoices in advance of the payments you expect to receive. When your customers settle their payments, the provider will receive the balance minus any charges that are incurred with the service. With factoring, the provider may also take charge of collecting from your customers. Invoice discounting is similar to factoring in that you will receive a percentage of your invoices in advance, but with the difference that you may still be responsible for collections and the management of your ledgers.

Other questions to ask yourself to determine if you need financing services

There are several other questions you can ask yourself to fully determine if you can benefit from cashflow and financing services: how necessary is your service or product to your customers, and is it essential enough for you to be able to dictate your preferred terms of payment? Are you aware of your customers’ credit-worthiness and the state of their business? Do you have the right amount of access to proper credit management skills and systems? If you have answered no to any of these questions, then it is definitely time to consider financing and other cashflow solutions for your enterprise.

Image courtesy of Stuart Miles/