A Key Factor For Business Health is Liquidity.

The Key to Healthy Liquidity is Often a Factor!

Thursday, April 22, 2010

Introducing The Liquidity Factor

Welcome to our new blog. We’re calling it “The Liquidity Factor”.

The type of “liquidity” we’ll be discussing in these posts is FINANCIAL liquidity: meaning cash or access to cash.

For your businesses, adequate liquidity -- having cash when it’s needed and in the amounts needed -- is as important as having enough water is to the health of your body.

The “factor” part comes with two explanations.

1. We buy invoices (accounts receivable) from other businesses that need to get paid faster than their customers are going to pay them. In financial language that is called “factoring” and those of us in the business are called “factors”, and

2. Business owners know that when there’s not enough cash to make payroll, for example, gaining access to that cash is the most important factor to their continued operation.

So the topic we’re going to be addressing is the “liquidity factor” as defined in two ways:

A. The PROBLEM that lack of liquidity causes business owners, and

B. The SOLUTION that a factoring relationship can provide.

To get the conversation started let me make just a couple of points:

• For many businesses, especially in the service industries, the largest single item on their balance sheets is Accounts Receivable.

• When you provide a product or service to a customer and you agree to wait for payment, you are financing that customer’s business.

• If one of your largest assets is the money your customers owe you, you are in the finance business in a significant way, whether you recognize it or not; whether you want to be in it or not.

• If you don’t want to be in the finance business, there are alternatives.

Exploring those alternatives. Analyzing their impact on the financial health of your business. Helping you gain or re-gain control of your business finances.
That’s what we’ll be addressing in these posts.

I hope you’ll find them of value and I invite comments, questions and suggestions—whether you agree with me or not—at any time and in any form.

The Interface Financial Group has been helping businesses with their cash flow needs since 1971. Solving cash flow problems is what we do.