Improve liquidity and cash flow in your business It should be at the center of your priorities. When you run and manage a business, it is essential to generate capital to realize your goals and ambitions.
Although the idea of "love of art" is very good as a utopia, business reality shows that commercial projects require economic resources to function. How can you improve this business management in your context?
Theory always comes before practice, also in business management. Therefore, we are going to start from the base: explaining what both financial concepts are.
1. What is liquidity?
Is the ability of an asset to be converted into cash without losing value. Generally speaking, this translates to cash available immediately.
2. What is cash flow?
Also known as cash flow or cash flow, reflects the difference between the inflow and outflow of cash in a certain period.
It is an important indicator of your company's ability to generate cash. In short, it reflects how many liquid assets you accumulate in a specific time.
Its calculation is very useful for investors, administrators and creditors who seek to evaluate the state of economic health of an organization. Above all, it allows:
Assess what positive cash flow produces and what capacity it has to satisfy its debts and obligations.
Determine what financial needs has.
Effectively budget cash and optimize business management.
3. How to improve liquidity: The best strategies
The time has come to know what you should do, or at least consider, to improve liquidity and cash flow in your business
Remember that these strategies will be essential to deal with recurring payments, such as payroll, suppliers, taxes, among others. Take note, these tactics will help you a lot.
4. Reduce your unnecessary expenses
Reducing unnecessary expenses represents the optimal way to increase the Cash Flow. Any savings of this type represents a direct increase in the immediate availability of money.
Therefore, eliminate or reduce all those that are dispensable. Do not underestimate the so-called “ant expenses”, small outlays that can make a difference.
5. Renegotiate with your suppliers
Have you stopped to think that they are probably essential in financing your business? So do not hesitate to call them to renegotiate the applicable conditions. Yeah improvements in prices and payment terms, you will notice the difference.
Following the same line, do the same with telephones, electricity, gas, office supplies, etc.
6. Boost cash sales
While offering financing to your clients can be a business advantage, it is important that offer incentives, including direct discounts, to receive payments immediately. This business management strategy will benefit you greatly. Manage payments well
Remember The important thing is not only to sell, but to collect.
Therefore, it is essential that a qualified person is in charge of managing and supervising pending maturities and deposits. Also, you must prevent and minimize late payment as much as possible.
7. Boost cash sales
Having products stored represents a significant cost. Be sure to adapt the available units very well to the existing demand.
Without falling into the risk of rupture stocks, you must be able to perfectly adjust this aspect, perhaps through technological digitalization. Also consider that many unsold products end up damaged or obsolete.
8. Monitor your working capital
Your ability to invest and meet short-term payments depends on the difference between current assets and current liabilities. Consequently, you must monitor this indicator on a recurring basis.
9. Open an emergency fund
Allocate part of your previous earnings to create this 'economic cushion' that will be great for you in case of unexpected incidents or disasters. It will enable you to face unforeseen expenses without trauma or desperation.
10. Open an emergency fund
Finding new partners or investors is the direct way to improve liquidity of a company. The alternative financing It is an option that can help you find people or entities willing to invest in your project. Thanks to its flexibility and profitability, you will always find a suitable solution.
Aren't you already thinking how improve liquidity and cash flow in your organization? At WorkCapital, we want to continue helping you: contact our expert professionals in the field now.
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