Navigation through the cash flow cycle is needed in order to keep a tap on the behavior of ‘accounts payable’ and ‘accounts receivable’. These two main components determine the proper flow of cash, in terms of income and expenses. Also, the profit factor in a business can be determined by the speed with which the cyclic movement of cash flow takes place in a business finance. The earlier two deterministic factors in a cash flow cycle will give a clear picture of the actual scenario of the financial functioning of the business.
Less cash flow can create a turmoil in the business and thereby affect the smooth functioning and the profit of the business if ignored or not detected at the right point of time. Less cash occurs when the expenses exceeds the sales. Even delay in funding sources and late payment by default customers can have a great setback in the business cycle, which ultimately leads to its depletion that is termed as ‘less cash flow’.
‘Prompt payment laws’ provides ways to ensure smooth functioning of small business by making an agreement between the suppliers and business owners for timely and reasonable payment conditions to be implemented. This helps in maintaining a uniformity and a fair payment facility that will help the small businesses to function in a controlled and authorized environment.
Small business entrepreneurs should opt for Automation tools as a payment facility, in particular, as it is crucial for the running of a business which has limited resources and cash flow.