If your business involves accounts receivable (AR), is it necessary to have all your customer invoices due at once? Some businesses invoice immediately after delivery of product or service. Other businesses prefer to invoice all their customers at once.
The first method has the effect of automatically staggering your AR and means that your business will have cash coming it at all times of the month. The second method produces a windfall of cash at one part of the month, but keeps the business dry of inflowing cash the remainder of the month.
Which is better? From a steady cash flow perspective the first one is generally better. Not all businesses can work this way, but those that can make an adjustment to staggered AR billing can improve their overall cash flow situation.
Another advantage to staggering AR is that you can avoid the end of month billing clump. The end of the month is when the customers will get a lot of other bills (mortgage, bank loan repayment, etc) so if you can avoid this time of month, you won’t have to compete with those.
If your business model has the flexibility to stagger AR, you may see an improvement in business cash flow. I like these Business Cash Advance guys, they are quick to respond, with competitive rates.
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