Conserving cash can create benefits in economic conditions facing business today. When business is in a slow growth pattern, cash is very important and if you don’t have cash when you need it the most operations can be constrained and the business may fail.
Preserving cash may not be easy for those businesses that have been used to having the money to spend at any time. However, when some belt-tightening is necessary, some practical cash preservation methods may be prudent.
Here are a few tips:
• Spend wisely. Make sure that purchases are made for need to have not nice to have items. Items should have a focus on producing revenue where possible.
• Ensure new employee hiring is necessary. Employee salaries are a significant cash drain so efforts to maximize productivity from current employees should be a first step.
• Lease equipment. Leasing vs buying can be an important option since equipment purchasing can be a serious cash drain.
• Plan ahead. Make sure you forecast financial activity. A plan outlining expected revenues and expenditures is vital to understanding cash needs. You certainly want no surprises on cash flow activity.
• Renegotiate leases. Rent is often a sizeable fixed cost that can be negotiated. Speak with your landlord; there may be an opportunity to downsize or even temporarily obtain rent reductions. Landlords often prefer to accept lower income than losing tenants.
• Go to the clouds. If your business is large enough to have in-house servers you are aware of the maintenance costs. If business is increasing this may be a cost effective way to create additional capacity without buying expensive new servers.
Business owners should share their cash flow objectives with other key managers to ensure every opportunity to maximize cash savings is realized.
I hope these thoughts are of value as you manage this key resource. Remember: banks don’t usually give you a second chance to run out of money.
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