When you look at your monthly or quarterly P&L reports, do you get frustrated?

Many business owners believe that sales and cash flow are interchangeable terms. No, they aren't.

Profit is the difference between revenue (sales) and expenditures (expenses).

Money moving in and out of your company is referred to as cash flow. More money comes in than goes out, resulting in positive cash flow. Negative cash flow implies that the company must invest more than it earns. Many times, not getting enough money comes from collecting rather than selling. You should be concerned about your capital structure.

Receivables Accounts Receivables Account

The first place to start searching for a disconnect between your revenue and your cash flow is your receivables.

• Is your accounts payable higher than your accounts receivables? If that's the case, that's a good thing.

• Do you bid longer terms on your receivables than your vendors send you for paying your payables? If that's the case, you've got a problem.

• Do you give your customers an advantage, such as a discount if they pay in 10 days rather than 30 to 60 days?

• Do your suppliers give you a discount if you pay in ten days rather than the normal 30 to 60 days?

• What proportion of the accounts receivables are past due?

• What proportion of your receivables would you have to write off in the end?

• When you extend credit to a client, what kind of due diligence do you perform?

• Giving a customer terms to pay your invoice is the same as giving you a short-term loan from your bank. Take into account the following:

• Is your receivable directly guaranteed by the company owner?

• Do you impose a late fee or interest on past-due balances that exceed your terms?

• Is your receivable unsecured, or does it have underlying collateral on which you can file a UCC lending statement as a protected party before it is fully paid?

• To overcome your cash flow problems, you must take care of your receivables to ensure that your customers pay you on time.

Relationship with Your Lender

Do you have a bank account with a line of credit? Is it sufficient to fund the sales and receivables you produce each month, if so? If this isn't the case, it's time to sit down and re-negotiate your Line of Credit. If you don't have a Line of Credit to fund your receivables, the first step is to schedule an appointment with a lender to discuss your options.

"Is your financial reporting up to date and in order?" you might ask.

Before approaching any lender in search of a Line of Credit, you must be prepared. After your last tax return, they want to see your company's most recent tax returns, internal balance sheet, and financial statements. Search for the best business advisory services around your area.