When I started the business of Worry-Free Receivables back in 2003, I couldn’t understand why so many businesses would tolerate leaving so many invoices on their books, and for so long. Then I realized it was because banks were happily throwing money at them to fund the lack of cash flow. It didn’t dawn on me that a business would rather continue to pay interest to a bank for a temporary band-aid solution than to think outside the box for a permanent solution. The band-aid was costly, but it was familiar.
There are several business band-aids that many companies use today to address damage to their bottom line and profit margin. Unfortunately, these band-aids are being used on a long-term basis rather than for short-term assistance.
Once you put a band-aid on a wound such as poor cash flow, it’s easy to act like it’s business as usual . . . until next month when you have to tap into the band-aid again. You aren’t solving the problem.
The various band-aid industries want you to believe their particular service is a necessary resource you need for poor cash flow. That’s because they really don’t want your cash flow to ever improve. They know if you solve the problem, you won’t need them anymore.
It has become the accepted ‘mindset’ in most companies today that, since you are never going to collect all your fees, you have to do something on an ongoing basis to make up for the missing income. And that mindset is consistently being fueled by collection agencies, collection software, lines of credit, and factoring companies because that mindset is expanding THEIR bottom line!
Don’t get me wrong, lines of credit are great to grow a business, but not for a band-aid.
Another exception for a band-aid is if your business has an emergency—like a major client filing bankruptcy—and you need to temporarily protect your business while you recover.
But today these band-aids are utilized as a necessary business expense instead of for emergency relief.
Do you have any band-aids on your cash flow? If so, you may want to take a look at their actual cost to your business. It just might be time to find a permanent solution.