In Carol’s latest post on MasterCard.biz, “How to Avoid a Cash Flow Crisis,” she says:
“Think of cash flow as the oxygen for your business. Without cash, your business will suffocate. Payments to yourself, employees and vendors can be put at risk when you haven’t been paid by a client.
And here’s something that small business owners don’t often think about: Your business can suffer huge financial stress after making a big sale.
Are you confused? I’ll walk you through an example.
Let’s pretend you’re a small business owner who sells t-shirts. You just got a big order from a big box store and you and your staff are over-the-moon excited. What you didn’t think about is that you will need to make and ship the t-shirts, so you will have to pay vendors for the shirts, the printing, the packaging, and the shipping—but you’ll probably wait 90 days for payment from the big box store.
In the meantime, your employees, landlord, electric company, and more will all expect to be paid on time. Sometimes a big order can almost put your business out of business!”
You can read the rest of the post here.