6 Commandments for Never-ending Cash flow
Written by Ashwin Satyanarayana for Gaebler Ventures
Growing businesses need cash to keep moving. Keeping cash readily available is almost impossible as there are payments, suppliers & inventories to manage. Here, we discuss six ways in which you can keep your cash flowing at all times.
Cash flow in business is the pillar your entire business rests on.
If cash flow gets affected, everything else does. While most businesses seem to think that there must be secrets to keep the engines of the business chug along, the only secret you've got to know is that without cash flow, your business is as good as dead.
Here's how you can wring the most out of the cash in your business:
Jettison or strategically remove assets: For most growing businesses, most of the cash is frozen in the form of assets. However, that doesn't mean you fire your assets as you will - that will be 'foolish' at best. Doing so indiscriminately can hurt your business or even cripple it. The idea is to slowly reduce your asset holdings strategically, spread out over a period of time. Make sure that your business operations are never hurt due these cash-flow management strategies.
Pump up your available capital: Raising cash by increasing your liabilities might seem to be an illogical move to many but it isn't so. Growing businesses need cash desperately and one of the best ways to increase the presence of positive cash flow is to raise it by increasing the number of investors (equity) or loaning amounts from public (debt). Although you might liquidate your own holdings in the company, you will be able to make a lot of cash available to grow your business.
Increase your revenues: One of the easiest ways to enhance your cash flow situation is to increase revenue flowing into your company. It is not only easy and attainable, but also desirable. You will certainly need large amounts of cash to make this happen (So, we are back to the chicken and the egg story, practically speaking!) Deploy a dynamic sales force, have systems that address accounts receivables, speed-up cash collections from distributors and customers, increase the number and types of sales channels.
Save cash and decrease your cash expenses: Cut down expenses like your life (or that of your business) depends on it. Monitor your expenses closely and cut out anything you don't need. Extra employees or non-productive employees, unmanageable assets, offices that don't seem to offer you any value, non-performing businesses you own, etc. These are things you could do to increase your profits in general. However, you could also cut out cash expenses or reduce them by spreading out your payouts over time instead of doing it in lump sum.
Boost productivity: Efficiency of people employed in your business, efficiency of machines deployed and the efficacy of business systems developed will all affect business profitability in general. Needless to say, proper systems in place will ensure that cash is always made available to fuel business growth. Getting more done with limited resources has always been the hallmark of successful companies.
Just in time cash: Following best practices like JIT (Just in Time), supply-inventory timing or, "stretching" payouts will make sure that you don't bleed cash all the time. It helps keep your reserves full and help you in growth instead of all the cash finding its way into envelopes of cheques written off for vendors, suppliers and others.
Ash has an undergraduate degree in engineering and an MBA from Ohio University. Today he is a corporate trainer, business coach and a freelance writer.
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