Thursday, December 30, 2010

Cash Management:

“Cash is king!” I know this sounds terribly familiar. Yet, it is frighteningly clear that business after business forgets this critical admonition.

In an earlier blog I mentioned that 30% of all businesses whose income statement show them making money…go broke! Don’t ever forget that you can’t make next week’s payroll from accounts receivables or inventory.

So, what can you do to make absolutely certain you have adequate cash resources to sustain your business regardless of the economic climate?

Well, simply stated, cash resource management involves controlling the time between paying suppliers or employees and collecting payment from customers.

If, in your business, you find you’re doing either of the following 2 actions which can drain cash flow, you very well may be headed into a cash flow crunch:

1) Obtaining loans at very high interest rates

2) Using factoring on your accounts receivables

Here are 3 simple techniques you can use to improve cash flow at your business:

1) Don’t extend credit terms to your customers beyond a reasonable amount of time

2) If possible, defer payments to suppliers or staff

3) Don’t replace equipment if there is the possibility of maintenance or repair

Next Week’s Blog: 18 tactics you can use to improve cash flow:

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