Maintaining healthy cash flow in order to ensure regular working capital supply is essential to every business. Yet many businesses suffer from poor cash flow which ultimately affects their day-to-day operations drastically.
Such a scenario can easily be avoided by streamlining operations in a manner that ensures healthy cash flow at all times. The tips and tricks provided in this article will help you towards that end in a big way.
Many businesses have money tied up in assets that can easily be liquidated for cash; and yet, they continue to sit on them. Avoid doing that! So, for instance, if you have machines that are no longer in use or equipment which is clearly not needed, it is recommended that you dispose of them for cash at the earliest possible.
This will relieve your business of assets that are unnecessary while at the same time, provide your business a fillip with the cash it perhaps urgently needs.
Speedy Billing and Payment Recovery
Many businesses suffer from unhealthy cash flow and a liquidity crunch simply due to poor business practices. For instance, they do not bill as quickly as they should. Further, they are lax when it comes to seeking payments due to it.
Avoid all such practices. Remember you are in business – where profitability is of the essence. You are not indulging yourself in pro bono activity. There should be no hesitation at all as far as billing your customers/suppliers is concerned, or to push for prompt payment from those taking a lot of time to do so.
Short Term Credit
There are times when healthy cash flow is a challenge for businesses, without any major outstandings. In such a scenario, opting for short term credit may well be the most viable option. This is especially true when you know that you will eventually be able to pay off your loan as cash flow improves and healthy profitability for your business is just around the corner.
Yes, financial discipline and appropriate allocation and usage of funds will always be essential.
Delayed Payment Outflows
A corollary to prompt receivables is delayed payment outflows. Yes, this may seem shrewd and snarky but as a savvy businessperson, you need to gauge what is in your best interest and act accordingly.
In this instance, if healthy cash flow gets a boost, then there really should be no harm for you to put off making business payments to the latest feasible time.
Note – This does not by any means imply delaying payments which you are liable to make for ensuring smooth operations of your business. For instance, salaries to your employees and regular bill payments, etc. should always be made on time, as and when due. Otherwise, you even risk running your business to the ground!
Buffer Money for Rainy Days
A savvy businessperson always prepares for rainy days. After all, ebbs and flows in income are a regular feature in any business. Accordingly, make sure that you have an adequate monetary buffer to serve as a cushion when money is hard to come by.
This money should be kept aside separately, only to be utilised in really extreme and urgent scenarios; not otherwise.
Regular Cash Flow Analysis
Healthy cash flow often proves to be a challenge for businesses, simply because they fail to analyse their overall cash flow position.
As a savvy businessperson, you must ensure that at your end, you regularly analyse your cash flow situation. If, for instance, you note that your business seems to have frequent cash flow problems, look into that problem and address it from its roots.
Maximize Income Sources
All too often, the daily grind of running functional businesses takes away our ability to look at things more closely, especially from the point of view of maximising sources of income.
For instance, there could be a business opportunity out there with enormous income potential, simply there for the taking. The more you focus on all such opportunities, the greater will be the healthy cash flow scenario you will witness in your business.
Some smart, savvy, intuitive steps can clearly go a long way in ensuring healthy cash flow in your business for perpetuity.