Let’s face it.  Cash flow is one of the hardest things to manage in your business.  You perform the work and then you wait to get paid.  This is a very common issue for small service businesses.  As a business owner you will incur expenses to service your customers but then can often have to wait 15 to 30 to sometimes 60 days to get paid.  Meanwhile you have still overhead to pay and your employee payroll for producing the work.  Most small businesses can not afford to float the receivables.  For example a small business producing $50,000 a month in revenue could easily hold a revolving A/R balance of $30,000 to $40,000.

A great tool to manage this receivables balance is a SHORT TERM LINE OF CREDIT which is based on your receivables.  For example, if you produce $30,000 in work and it takes 45 days to get paid a short term line of credit can be used to pay your employees and material until the work is paid.  Once the services has been paid then you can pay down the line of credit.  The short term line of credit is not meant to be a fixed loan or carry an extended balance.  It should be paid down every month and only used to finance your receivables balance.  This allows your business to continue to operate with cash and not crunch your small business.

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