The labour hire industry in Australia is quite competitive. However, it is also one of the slowest paying industries in the country. Effective cash flow management is imperative to pay contractors in a timely manner, regardless of when clients clear invoices, in order to keep the business running and work on expansion plans.
Readily available cash is a primary requisite for running day-to-day business operations. It helps to pay employees, commission maintenance works and fund business development expenditure. More importantly, it acts as a comfort cushion to fall back on in case of financial deficits, arising during lean business periods or due to clients not clearing invoices in a timely manner. Without a steady cash flow, enterprises run the risk of going out of business. Thanks to invoice discounting, small to medium businesses, including start-ups, can now go about their work confidently and combat fiscal deficits with ease.
One of the most challenging issues that small Australian business face is delayed payments. It threatens the objective of maintaining a seamless cash flow, imperative to keep the enterprise running, and spearheads a string of other operational and financial issues. An important point to bear in mind here is that there is a stark difference between cash flow and profitability. While most small businesses are profitable, i.e., they make enough sales to earn revenues, their cash flow runs in negative figures because they fail to collect those revenues ‘on time’, thus piling up their ‘accounts receivables’. With more and more companies facing a cash flow shortage and struggling to pay their bills from their bottom line, it is important to know how to manage accounts receivables.