Cash Management Strategies

Cash Management Strategies

When it comes to business, cash flow is king. The money you have at your disposable at any given time, without the burden of debt, is oftentimes what makes the difference between success and failure.

Here are some cash management strategies you can consider:

—  Pay close attention to details – It’s pretty hard to manage something unless you measure it first, and a daily report is a good measurement tool for cash management. Not only does it give you an unbiased look at your daily financial activities, but it will also reveal changes and patterns you might have missed before. This will give you the opportunity to fine-tune your company to perfection. Also, consider checking your daily cash report against AR (accounts receivable) and AP (accounts payable) every week.

—  Ask for a deposit upfront – If you aren’t already, you should start asking every client or company you work with for an initial deposit or milestone payment in order to secure your services. Some clients might give you push back on this and you can decide if you want to bend the rules for some people. More than likely you will find most customers do not mind securing services with a deposit as long as they feel like they can trust you to deliver on-time with accuracy. Doing so will give your company an immediate boost in cash flow.

—  Don’t settle for late payments – And if you do find yourself getting multiple late payments, make sure you look into what exactly is causing the problem. Late payments can be the result of many different things, some of which can be extremely hurtful to your bottom line and your company. Finding the root cause of the issue should always be the top priority when running into this type of cash flow problem.

—  Lower your operating costs – One of the most effective cash management strategies is to cut or delay expenses as much as possible. Now, this process will look different for every company so it’s important to understand what your business can and cannot live without. You can reduce your spending by considering the following:

—   Outsourcing or contracting

—   Hiring part-time employees

—   Leverage technology

— Cancel unwanted/unneeded services

—   Invest in affordable marketing materials

The truth is, there are a hundred different ways to reduce your operating costs regardless of the industry you’re in. Take a good, hard look at what your company is spending money on and commit to cutting corners without losing any quality in your work.

—  Negotiate with vendors – Mutually deciding on new payment terms, lower fees or extended payment cycles could make a huge difference in your cash flow.  Do not be hesitant to ask your vendors for new terms, multiple times if needed. Sometimes, a little persistence goes a long way. To be as successful as possible, focus your attention on vendors who you have good, long standing relationships with and you’ll find out that they are willing to work with you more times than not.

—  Get rid of unused assets – When it comes to cash management, you have to get creative if you want to see results. Look around your office to collect any and all unused equipment. A good rule of thumb here is: if you haven’t used it in 6 months, you can probably go without it…for now at least. Get stuff moving off your shelves and use the proceeds to fund new and exciting ventures within your company.

—  Increase your margins (if possible) – If you want to see your business raking in more cash, think about increasing the cost of your services and/or goods. If you’re unable to increase the cost of your services, see if you can reduce your manufacturing and/or delivery costs. Increasing your margins isn’t easy, it might not even be a possibility for your business. However, if you are trying to increase margins, do not sacrifice quantity for quality.

— Invest in short-term money market instruments – Good cash management strategies are not always about immediate gratification. It’s vitally important to build nest eggs as your business continues to grow. Investing in short-term money-market instruments helps to make your money earn more money, that is, gives you the chances to earn interests without losing access to your money. 

Consider these strategies and choose carefully which ones to implement in your company. Once you come up with a solid plan, the details will take care of themselves. If you can manage to successfully apply one of these cash management strategies, you will experience long-term growth and expansion within your company.


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