CASH FLOW AND WAYS TO IMPROVE CASH FLOW
The Small and Medium Enterprise (SME) sector always have incredible talent of what they pursue but not all get equal opportunities in life to become a huge company! Every business has to thrive through immense planning to SUCCEED!
One of task small business owners overlook is to budget their cashflow. I believe managing cashflow in an optimum way helps you to priorize your business activities. All small business founders do have a virtual image on their mind but preparing a cashflow on paper is equally important. When you do not budget your cashflows, you would not know how exactly you will grow in your business.
There are various ways to improve cash flow of which some of most important are under:
1. Optimum Management of Accounts Receivable / Accounts Payable:
Accounts receivables & Accounts payables are most important stakeholders of the company who can solve as well as create problems in managing cash flow. Managing receivables by giving attractive discounts and incentives help the company’s to make the payments on time. Managing payables by either taking discounts or negotiating good terms of payment with the Creditors will help to generate cash flow in crisis situations. The right ratio and ageing of AR & AP can be determined by taking into various factors and a help of the expert is recommended in it.
2. Managing Capital Structure:
Capital Structure means the different means of finances available for a business. The leverage of optimum capital structure helps from increasing interest burden more than the return on the business or the investment. There are various means of finance with different rates of interest, which one to choose during the life span of the business should be derived looking into the position of capital structure. Efficiently managing capital structure could help create an arbitrage and generate more cash flow in the business.
3. Proper Administration
Administration has a broad meaning for any business and small tasks when are missed may create bigger problems. There are various administrative tasks like proper recording of the sales, follow ups with accounts receivable, reducing or delaying costs, to negotiate good buy or lease arrangements etc. Small businesses do not have dedicated resources for each task and the owner or founder has to take care of these things. When an administration of the business fails, it can never survive in the market.