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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