Need to Maximize Cash flow?
In these times of a tight economy and
when growth is difficult to sustain it is important to stay on top of the
company’s finances and to preserve cash.
Here are ways to maximize cash
availability in the business.
1. Track cash
flow monthly.
Use a budget to track anticipated cash
inflows and outflows so you can assess your situation and react to problems
such as the loss of a key sale. This frequent monitoring allows you to delay
discretionary payments if necessary.
2. Monitor
financial statements.
Review statements monthly and look for
issues. Closely review key indicators of the business’ health including a
variance in expected gross margin and inventory turnover.
3. Work with
customers and suppliers.
You can increase cash flow by offering
discounts to early paying good customers and preserving cash by having
suppliers help by extending payment terms.
4. Chase the
slow payers.
Owners need to be diligent pursuing
overdue accounts. If you do not insist on collections you are financing someone
else’s business for them.
5. Protect
working capital.
If cash is tight don’t pay for long term
investments in equipment. It is better to use debt to finance these projects.
Debt can be used to re-finance fixed assets to free up capital.
6. Cut waste.
Make every effort to improve
productivity, eliminate inefficient equipment and other sources of waste.
Engage staff to get involved in developing solutions.
These suggestions may help improve that
most vital business tool – cash flow. Agree?
Gerry@polarisgroupmc.com
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