Cash flow can often look like an underwhelming fireworks display, with isolated ‘woos’ and ‘wows’ separated by lengthy periods of financial darkness in between.
Ironically though, out of those darknesses can come some of the brightest starbursts in your financial sky – and debt itself can sky-rocket your profits higher.
First of all, let’s make clear that we are not suggesting you hold on to debt as an investment for a rainy day; the sooner you pursue for payment, the better your chances of recovering your funds.
But if you do have outstanding amounts owed to you by customers from previous years, pursuing them could be one way to even out any short-term dips in sales.
Take the example of Logson Group, a packaging manufacturer based in Bardon, near Coalville; according to a Leicester Mercury report, the company posted annual profits of £15.7 million for 2012.
This is an impressive increase of around two thirds compared with the previous year, in contrast with a dip in sales to £168.5 million, from £173.8 million in the previous 12 months.
How Logson Group achieved this is unclear in the report, but if your own sales patterns look like a sheet of corrugated cardboard, focusing on outstanding debts owed to you could be one way to make those figures paper-smooth.
By ensuring you recover everything that is owed to you, you can insulate your firm against non-payment and keep your cash flow more robust when you experience a lull in sales.
What’s more, if you have invoices owing since previous years, recovering those funds could have a significant positive effect on your profits for the current financial year.
Adding statutory interest and any permitted penalties to the amount recovered can further enhance this effect – potentially giving you a return on those funds that would have been unimaginable in a savings account or investment fund.