25% of companies that fail in the first year do so because of cash flow problems. If most or all your sales are on credit and are not being collected on time you will run into a brick wall. Your income statement may show that profits are being made while your bank account is empty leaving you with no way to pay suppliers, employees and other creditors.

Your accounting system should be set up so that

1. Invoices are promptly sent out

2. It is easy to identify how much each client owes and overdue amounts that client so follow up can be made.

3. Prepare cash forecasts so you can know in advance when cash will tight. You can then negotiate with suppliers to delay payments, press clients for earlier payments and prioritize payments for the cash you have on hand.