Whether the business is struggling or
growing, cash flow management is very important and for many startup businesses
it is the key to their business survival. You might have heard of before those
about 60% of the businesses that are going like bust are still giving profits
are running out of cash. From the point of view of cash, business is actually
like a sponge and it even sucks with growing no. of cash, and to get gain back
soon, one should give it a better squeeze.
If your business is increasing rapidly or managed badly, just squeezing
hard will not take you further rather that sponge will just become bigger.
Understand and accept the working capital
amount, your business require for operating. This should be your first step and
then decide how much inventory at present you are holding? Secondly, always
ensure that your startup business has enough amounts of cash for funding your
working capital requirements. These can be utilized for keeping few months
worth of bank outgoings for a rainy day. That might be a past thing, but I f
this is the case with you then make sure to buffer some sort or either use your
personal funds that are overdraft or available or revolve any kind of credit
facility.
Then further plan ahead for future working
capital. It is of no good to find out the reason for surviving until few things
get picked up when you have reviewed already and agreed about the facility of borrowing
capital. After this just plan step by step every month. Review your current systems
that are so poor in small medium enterprises.
Eventually, it has been observed that even
if the business is growing quickly, slow payments create a financial problem
that affects business seriously. The solution of this problem is to use invoice
factoring for funding slow-paying invoices. As it will help in improving cash
flow immediately and allow you to offer payment terms. Companies that
manufacture goods and re-sellers that keep their warehouse stocked with
products may get affected by this problem. If the too much product is
manufactured, then it might end up sitting on shelves and will tying up cash
flow also.
Before being used or sold in the
manufacturing process, fine-tune your inventory in order to make sure that you
stock items for short period of time. Depending upon your sales forecasts,
volume supplier capabilities and available cash, one keeps that amount of
product stocks. Always carefully level your inventory before you get run out of
stock at the time when you need it most because then you lose valuable clients.
Remember to make it as simple as possible
for your clients to pay for you. So better, quote your account no. of your bank
on your invoices, and directly ask for credits or rather you can say automated
payments. Accept all credit cards, or better also set up your PayPal account
for your website. In this way you don’t have to wait for a cheque to be posted
at present time.
Cash flow management is all about the how you
manage your working capital by understanding your business works, by getting access
to the amount of working capital and then approaching towards planned as well
as proactive approach. Moreover, running out of cash is stressful, embarrassing
and not good for one’s well being, not counting the additional costs and
finance charges that generally follow.
Alcor M&A is a
leading advisory firm providing financial services with an emphasis on
customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private
Equity, Debt Financing and International
Business Development. These
services leverages insights, relationships and a culture that
emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.
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