In world of trade, industry and commerce, entrepreneurs regard cash to be the king. You may assume that your organization is going to enhance its sales revenues in the coming six months, which will result in huge profits. However, you need to make sure you have enough liquid cash at your disposal to meet the expenses you are likely to incur during this period. Otherwise, you may not get an opportunity to realize such earnings. This is the reason why you need to take steps to improve your establishment’s cash flow position.
Patrick Lanning – How your organization can avoid a cash crunch?
Financial experts point out the following tips you can adopt to ensure you have sufficient cash funds within your business at any point of time:
- Hasten your cash receipts
As an entrepreneur, you need to take necessary steps to ensure your debtors pay their dues on time. It is prudent on your part to issue sales invoices immediately after you dispatch the products or services whenever you conduct a successful sale. You should also think of changing your terms of payment. For instance, if you allow your clients 60 days to repay the amount that remains outstanding in their accounts, try to reduce this period to 30 days. One way of achieving this objective is by offering them attractive discounts and charge penalties on late offenders.
- Encourage your clients to make repay in plastic money
Patrick Lanning, a risk management expert and the Vice President of IMA Financial Group, says you should encourage your customers to make payments using their credit or debit cards. It enables you to receive the full value of the products or services you sell them in the following day instead of having accepting checks, which you need to deposit. However, you should always ensure the costs of this mode of payment is not too high.
- Scrutinize your organization’s cash flow position
Most organizations go through period of expansion and recession according to their business cycle. For instance, for schoolbook publishers, their peak season is the beginning of the session of such educational institutions. A thorough scrutiny of your establishment’s cash flow position can indicate such cycles. This information can help you to determine the period when you need to borrow funds, hire additional employees and enhance your marketing efforts during peak.
- Open a saving accounts
Most banks allow their corporate customers to deposit their cash funds in certain saving accounts that offer interests at competitive rates. However, when the need arises, you can withdraw such money especially when your organizations is facing as cash-crunch.
- Utilizing your merchant credit card
When it comes to paying your suppliers, you could consider using your merchant credit card instead of cash. This is because most banks allow you a grace period of 21 days to clear such outstanding dues from the date you receive your credit card statement.
Experts say the above steps go a long way in helping you improve the organization’s cash flow position. However, Patrick Lanning states apart from this you also focus on enhancing your marketing efforts. This goes a long way in ensuring your business operations run smoothly.