Benefits of Cash Business vs Credit Business 1/5

Updated: May 2, 2020

Fundamental

Cash is the only life and death issue for your business. There are many important things in your business to worry about – people, products, service – but these are all important because they impact cash.


Credit, "There's no such thing as a free lunch." This adage refers to the idea that it

is impossible for a person to get something for nothing. The cost is hidden and comes in

a form of freedom, mental & physical health.


Real-Life Experience

In 2015, faced with a dilemma of starting a Manufacturing Business, Most of the Market feedback was that in Manufacturing Business you will have to sell on credit. The Management was firm that they would deal only in Cash Sales and Purchase and if the Market did not allow then they would rather shut down the business then continue in Credit Business.


Alhamdolillah, Because of Cash Business they were able to weather and prosper from the Storms like

- Demonetization

- GST

- Elections Slowdown

- Currently COVID-19 Pandemic


Benefits of Cash Business

- Rida Mubarak of Aqa Maula TUS

- Business would be forced to be Cash Flow Positive

- Focus on Business will increase as no tension of Supplier payments or Customer Receivables.

- Would be able to Diversify into new business products, business line or Services.

- Business and Business Owners enjoy good health.

Challenges of Cash Business

- Expansion is limited to available Capital

- Lower Profit Margins

Benefits of Credit Business

- Easy to Start or Expand Business with Little or No Capital

- Higher Profit Margins

Challenges of Credit Business

- Business would be Cash Flow Negative

- Lot of Stress in following with Customer for Receivables

- A lot of Tension in dealing with Supplier for their payments

- Leads to Overtrading, Deadstock and Bad Debts

- Difficult to Focus on Business Development or Diversification as consumed in Accounts Receivables and Payables.

- Business and Business Owner Health will deteriorate over time.


Next Post Available

2. Benefits of Cash Purchase vs Credit Purchase

3. Benefits of Cash Sales vs Credit Sales

4. How to Convert from Credit Purchase to Cash Purchase

5. How to Convert from Credit Sales to Cash Sales



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