A business can be highly profitable on paper but still fail if it runs out of cash. Cash flow mismatches—where payables are due before receivables are collected—are a primary cause of business insolvency. Staying liquid requires active, strategic cash management.
1. Accelerate Invoicing and Collections
Don’t wait until the end of the month to send invoices. Invoice immediately upon delivery of services or products. Offer small discounts (e.g., 2% net 10) for early payments, and enforce strict follow-up protocols for past-due accounts.
2. Negotiate Extended Terms with Suppliers
Build strong relationships with your suppliers and request longer payment terms (e.g., extending Net 30 to Net 45 or 60). This keeps cash in your bank account longer, giving you a valuable buffer.