When it’s about your business finances, it’s all about cash! Regardless of whether your business cash is expanding or is in a crisis, correct cash-flow is essential. It’s a necessary element of business survival. Did you use a huge chunk of the working capital? If so, you might witness cash issues, which might stop you from purchasing materials, paying the suppliers, and your employees. The solution for this is adequate cash flow management.
Robert Trosten shares on how to resolve cash-flow issues
Simply put, cash flow management refers to delaying the cash outlays while urging the consumers to pay at the earliest. Are you witnessing any cash flow issues? If yes, you can follow what Robert Trosten, a financial expert, offers preventive measures or solutions.
- Short-term financing
The short-term financing, for instance, a credit line can get used for making urgent purchases. It also gets used for bridging the gap between receivables and payables. Several banks provide business credit cards, using which organizations can pay the vendors.
- Liquidate the money linked with assets
Do you have a device or machinery in your store/office that you don’t use anymore? Has it become completely obsolete? If yes, then you can sell it to generate fast cash. Any obsolete and idle device usually takes up space in the store/office as well as ties up money that otherwise can get used productively. Have you owned this machinery or equipment for a long time? If yes, chances are its book value would be equal to the salvage value. The value might even lessen, leading to taxable gain. And it is essential to report this gain in the tax filings.
- Long-term financing
For instance, significant asset buys, such as real estate and a device, need to get financed using long-term loans instead of working capital. It enables you to disseminate the payments on the average span of assets. Chances are you have to pay an interest. However, it would be best if you also preserved the working capital for business needs.
- Fast recovery of the receivables
It is essential to bill and collects fast! To stay secured from late payment, you need cash to bill at the earliest. Also, clear the invoices as well. You might want to modify other billing practices, for instance, the invoice frequency. There’s no need to wait till the end of a month. Instead, you can generate the invoice the moment a service or goods get delivered. If there’s a big order, you can use progressive invoicing as you provide the service or manufactured goods.
- Delay the payables
This factor, at times, gets overlooked. Till such time you have a worthwhile incentive so that you can pay early, find out how late are vendor payment acceptable. It would be best if you consider whether there are late fees applicable that might hamper your vendor relations. It helps to keep the necessary cash in the account till such time it becomes essential to pay.
Finance is an essential aspect of business continuity and development. These are some of the tried and tested tactics, which can keep your cash flow management correct.
