Please ensure Javascript is enabled for purposes of website accessibility How Inflation Can Impact Your Company’s Cash Flow - Single Point Capital

How Inflation Can Impact Your Company’s Cash Flow

By March 29, 2022April 26th, 2022Business

Headlines about inflation seem to be everywhere, and while it seems to be the favorite buzzword for 2022, we are already experiencing the effects. Prices on food, consumer goods, raw materials, and gas are rising. Whether businesses are taking advantage of fear or there are tangible reasons for inflation, all the signs are here. For businesses across all industries, there is a direct relationship between inflation and cash flow. Inflation can cause cash flow to become severely strained. Fortunately, there is a simple solution that businesses can use to stay ahead of inflation.

How We Arrived at Inflation

Inflation is not an overnight occurrence. The current situation with inflation goes back about four or five years, but there was no single event that led up to it. In 2017, inflation was already starting to creep into finances, so the Federal Reserve place interest rate hikes on both personal and business loans. The rate hikes continued, sometimes with multiple raises per month. In 2018, there were threats of tariffs, which made companies over-order products and raw materials from overseas ahead of the deadline. When the tariffs turned out to be nonexistent in 2019, many businesses found themselves overstocked without much in the way of consumer demand. Prices everywhere dropped, and even the trucking industry found it challenging to negotiate decent rates for transporting shipments. If that was not enough, 2020 saw the start of the COVID pandemic. Businesses were thrown into disarray, and the trucking industry suddenly found itself in high demand to get basic items, like toilet paper, to grocery stores. Tax breaks and PPP loans – with full forgiveness – were introduced to keep our economy moving.

Cash Flow and Inflation

Now in 2022, we are starting to pay for the upheaval of 2017-2020. Additionally, the strains on supply chains and fuel production are exacerbating inflation. Prices are rising faster, and businesses are trying to generate revenue to cover overhead and build reserves for growth. As in 2017, there is a discussion of raising interest rates on loans, which could severely impact businesses of every size that have taken on debt over the past few years. Inflation and interest rates are forcing businesses to pivot away from loans so they can build up their own capital reserves as a buffer against economic turbulence. However, the issue still remains that businesses that issue invoices with payment schedules of 30, 60, or 90 days end up waiting a month or more to access revenue. This places a tremendous strain on cash flow, especially when operational costs are rising due to inflation. In an economy where commerce takes place at an ever-increasing pace, businesses should not have to wait 30 days or longer to receive payment from their customers.

Improving Cash Flow with Invoice Factoring

Invoice factoring allows businesses to overcome multiple obstacles at once. First, invoice factoring is not a loan. No debt is placed on the books, there are no fixed payments, and no ongoing interest rates that are subject to arbitrary hikes. Instead, unpaid invoices are submitted for factoring and are converted immediately into cash. Second, because invoices are converted so quickly, cash flow is accelerated, so businesses can cover operational costs. Similarly, the accelerated cash flow allows businesses to build up capital reserves to reduce or eliminate the need for loans. By building capital reserves, businesses not only gain the ability to finance their plans from within, but also create a buffer from inflation, economic downturns, unexpected costs, or anything else the future might hold.

Offset Inflation with Invoice Factoring Today

Single Point Capital is a leader in invoice factoring services nationwide. We will factor unpaid receivables from your business and make the funds available within a single day. Why wait 30 days or longer to receive payment from your customers? Start getting ahead of inflation today by accelerating your cash flow with invoice factoring from Single Point Capital. When you partner with us, you get a personal account manager, access to a suite of tools to track your payments, credit checks on your customers to help inform future decisions, and much more. To get started, reach out to the team at Single Point Capital today.

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