Your cash flow may be like a yo-yo – one minute it's up the next it is down.
Try to take an ordinary small to medium sized business with growing turnover.  The orders are up and the business has the opportunity to increase profitability. But, unfortunately, there is one thing that holds it back – its CASH FLOW.
Let's look at a typical monthly cycle of this business:
Several of its major customers settle their account in the first week of the month. As the business is able to pay some of its suppliers, the overdraft is within the limit set by their bankers. So, the yo-yo is up.
In the second week they will receive a large order. But this will need the purchase of extra raw materials from a supplier who will need to be paid up front to keep the account within its credit limit. As the bank overdraft limit has been reached, the materials required cannot be purchased. Consequently the order has to be turned down. And the yo-yo is down.
A coordinated effort is made to accumulate money in on overdue accounts in the third week. This is done in order to provide sufficient funds to pay monthly wages at the end of the month. The yo-yo is up.
The final week of the months will see the wages paid taking the overdraft back towards its limit with quarterly VAT due at the end of the month. Nevertheless, this payment will have to be delayed to the first week of the following month. It means this has to be done when payments from customers settling end-of-month accounts are received. So, the yo-yo is down.
This will go on until eventually the yo-yo will not come back up.
You should find the solution. There may be three ideas that come to mind.
1) If you have money, then put more of them into the business. It is possible to have a second mortgage on your home.
2) You may ask an outside investor to put in the money. But this can mean parting with some of the equity of the business. Then future benefits will have to be shared.
3) Try to borrow more money from the bank. But you should know before bank will increase funding, they will want more security.
In spite of these three there is the fourth solution. This is factoring. Factoring releases cash tied-up in the sales ledger. Consequently as the business enlarges so does the funding available thus beating the cash flow yo-yo affect.
But what is main source of day-to-day cash into the business? This is the sales ledger. Nevertheless, where an enterprise sells business to business this is normally done on credit terms. Having made the sale, created a benefit but you don't yet have the cash. The cash is available with factoring. However, you need it rather than when your customers choose to pay you thus allowing you to control your cash flow needs.
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