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When running a business you are likely to encounter numerous challenges which need to be overcome to ensure survival, one of which might be cash flow issues. Cash flow is the money which comes into the business against the money going out, and is calculated as such.
Having issues with cash flow can significantly hamper your business’s growth prospects and daily operations, so it is essential to optimise it as early on as possible. Here are some of the ways to do this.
Review Your Budget
Once you have calculated your net cash flow and have a good idea of where money is coming in/going out of the business, you should immediately assess your budget and make any necessary changes. This means looking out for any inefficiencies in spending, so that you can tighten up on outgoing expenses.
It may also mean changing suppliers for certain business supplies if there are cheaper alternatives, as any area where money can be saved must be explored. Reviewing other aspects such as bills, travel and rent is a good idea if you want to seriously save through budgeting.
Use Invoice Finance
Another way to solve cash flow issues would be to use invoice finance, which is specifically aimed at those businesses which invoice their customers. Invoicing often involves a lengthy wait of between 30-120 days, which can significantly halt cash flow and stop a business getting the funds it needs.
Invoice finance involves a third party lender, such as marketinvoice, paying a large portion of the invoice’s value in an upfront payment (minus their fee), usually within 24 hours of receiving an application. When the customer pays, the remainder of the money is then forwarded to you, and cash continues to flow through the business.
Liquidate Assets You Don’t Need
Another problem many business owners come up against is having too many old assets which are ineffective or useless to current business operations. This could include old business vehicles, buildings or even stock. No matter what the assets are, it is worth selling them off as their cash value will benefit the business far more than letting them stagnate under your ownership.
The money generated from selling these assets can be put straight back into the business, funding daily operations or aiding growth. Make sure you do not sell assets which are still useful to the business, however, as this could seriously hurt its ability to function.
Invest in Growth
Once your company has begun to grow and prosper, cash flow issues become a thing of the past as you should have more customers, revenue and overall operational capability. It is wise to have a plan for growth, as you need to make important decisions as to the objectives and direction of the business.
Investing in new staff to help manage cash flow and business finances is one way of preventing cash flow issues. Another would be to invest in a comprehensive marketing strategy/expert, which will bring in more customers and thus more cash to the business.
Do some further research to find out which cash flow optimisation methods would be best for your business. Once you have an effective system in place to measure and manage cash flow, your business has the best chance of achieving accelerated growth and success.
Very Useful info, Dequiana. What I liked is liquidate assets you don’t need. I did a detailed study of such assets and found some of the waste ones. Sold them immediately!! Thanks.