Keys to managing cash flow to grow a business

Cash is considered as a king when it however comes to the financial management of a

growing company. The lag which is between the time when one has to pay to the suppliers

and employees and also the time which one collect from the customers is thus the problem,

and the solution to it is cash flow management. At its simplest, cash flow management

however means delaying the outlays of cash as long as it is possible while however

encouraging anyone who owes one money in order to pay it as rapidly as it is possible.

The purpose of this article is to make the reader aware of the keys to managing cash flow to

grow a business.

The following are the ways in which one can achieve this :

1. Measuring Cash Flow

One must Prepare the cash flow projections for the next year, next quarter and, if one is

however on a shaky ground, next week. An accurate cash flow projection can thus alert

one in order to trouble well before it strikes.

One must thus Understand that cash flow plans are however not glimpses into the future.

They're the educated guesses that however balance a number of factors, including the

customers' payment histories, one’s own thoroughness at thus identifying the upcoming

expenditures, and the vendors' patience. One must thus watch out for assuming without any

justification that the receivables will thus continue coming in at the same rate they have

recently, that the payables can however be extended as far as they have in the past, that one

however has included the expenses such as capital improvements, loan interest and also

principal payments, and that one however has accounted for the seasonal sales fluctuations.

One must thus also start the cash flow projection by thus adding cash on hand at the

beginning of the period with the other cash which is to be received from various sources. In

the process, one will thus wind up gathering the information from salespeople, service

representatives, collections, credit workers and the finance department. In all the cases, one

will however be asking the same question which is as to how much cash which is in the

form of customer payments, interest earnings, service fees, partial collections of bad debts,

and also thus the other sources is one going to get in and also when.

Also, the second part of thus making an accurate cash flow projections is thus the detailed

knowledge of the amounts and dates of the upcoming cash outlays. That thus means not

only knowing when each penny will thus be spent, but also on what.

2. Improving Receivables

If one has however got paid for the sales the instant when one had made them, one would

thus however never have a cash flow problem. Unfortunately, that thus doesn't happen, but

one can thus also still improve the cash flow by thus managing the receivables. The basic

idea is thus in order to improve the speed with which one can however turn the materials

and supplies into the products, inventory into receivables, and also the receivables into cash.

Here are thus some of the specific techniques for doing this:

● To offer discounts to the customers who however pay their bills rapidly.

● To Ask the customers to make deposit payments at the time when the orders are

taken.

● To do credit checks on all the new noncash customers.

● To get rid of the old, outdated inventory for thus whatever one can get.

● To Issue the invoices promptly and also follow up immediately if the payments are

slow in coming.

● To Track the accounts receivable in order to identify and also avoid slow-paying

customers.Also, Instituting a policy of the cash on delivery (c.o.d.) is thus an

alternative to refusing to do business with the slow-paying customers.

3. Managing Payables

Top-line sales growth can however conceal a lot of problems-sometimes too well. When

one is however managing a growing company, one has to watch the expenses carefully. One

should also not be lulled into the complacency by thus simply expanding sales. Any time

and any place one thus sees the expenses growing faster than the sales, one should examine

the costs carefully to find the places to either cut or control them. Here are thus some more

tips for using cash wisely:

● One must take full advantage of the creditor payment terms. If a payment is thus due

in 30 days, one should not pay it in 15 days.

● One must use electronic funds transfer in order to make payments on the last day

they are due. One will thus remain current with the suppliers while however

retaining the use of the funds as long as it is possible.

● One must communicate with the suppliers so they know their financial situation. If

one ever needs to delay a payment, one will however need their trust and

understanding.

4. Surviving Shortfalls

Sooner or later, one will thus either foresee or would however find himself in a situation

where one lacks the cash in order to pay the bills. This thus doesn't mean one is a failure as

a businessperson- one is a normal entrepreneur who however can't perfectly predict the

future. And there are normal, everyday business practices that can however help one in

order manage the shortfall.

The key to managing the cash shortfalls is thus to become aware of the problem as early and

as accurately as it is possible. Banks are thus wary of the borrowers who however have to

have money today. They'd thus much prefer lending to one before one needs it, preferably

months before. When the reason one is however caught short is that one has thus failed to in

order to plan, a banker is thus not going to be very interested in helping one out.

If one assumes from the beginning that one will thus someday be short on cash, one can

thus also arrange for a line of credit at the bank. This however allows one in order to

borrow money up to a preset limit any time one needs it. Since it's however far easier in

order to borrow when one doesn’t need it, arranging a credit line before one is short is vital.

If the bankers however won't help, one must however turn next to the suppliers. These

people are however more interested in keeping one going than a banker, and they thus

probably know more about the business. One also can often get the extended terms from the

suppliers that however amount to a hefty, low-cost loan just by thus asking. That's however

especially true if one has thus been a good customer in the past and has thus kept them

informed about the financial situation.

One must thus Choose the bills one will pay carefully. One should also not just pay the

smallest ones and should then let the rest slide. Make a payroll that the first-unpaid

employees that will however soon be the ex-employees. Then one must pay crucial

suppliers and at the end should thus ask the rest if one can skip a payment or either make a

partial payment.