How to Effectively Manage Company Cash Flow and Assets

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Written By Adeyemi Adetilewa

If you are an entrepreneur, you can’t afford to ignore the importance of managing your company’s cash flow. Managing your company’s cash flow is one of the most important aspects of running a business. It is crucial to be proactive and manage your cash flow appropriately to ensure your business continues to thrive.

Cash flow is significant to the success of a small business. Control of cash flow will determine whether a business is profitable or not. As such, it is important to have a system in place to ensure cash flow is maximized and that the business is prepared to handle any cash flow interruptions.

1. Indulge in long term financing

It is an open secret that companies are always on the lookout for capital to finance their future plans. But, sometimes, the cash in hand is not sufficient to fulfil the requirements of the company.

The company needs to make proper arrangements for long-term financing for the smooth functioning of the company. Long-term financing involves taking loans from banks. Long-term financing is also known as working capital financing. It is a source of funds that is obtained for a longer period of time in order to finance the working capital requirements of the business. 

The working capital requirements of the companies are met through long-term financing. It is also known as permanent financing. This type of financing is also known as long-term funding. It is a type of funding provided by banks and other financial institutions.

It is not possible to get funds from the banks on a short-term basis. Hence, the need for long-term financing. It is an important source of funds. It is a very important aspect of the business.

Indulge in long term financing

2. Liquidate cash tied up with assets

Cash tied up with assets means money that is tied up in assets that cannot be converted into cash. It is also called idle funds.

If you are looking at cash flow, cash tied up with assets is something you want to reduce. The best way to reduce cash tied up with assets is to reduce your inventory, accounts receivable, and work in process. If a customer buys from you and you don’t deliver, you will have to deal with an angry customer, which is never a good thing.

3. Forecast cash flow 

Cash flow forecasting is a process for predicting and analyzing changes in future cash flow. It is a financial tool used to plan for the future and act accordingly.

The purpose of cash flow forecasting is to know how much cash is coming into the business and how much cash is going out. A cash flow forecast enables the business to know the amount of cash that is needed in the short term in order to meet the monthly expenses.

A solution for cash flow forecasting will help you determine how much money you can take out of the business or how much money you can put into the business.

Forecast cash flow–it sounds like a simple task, but it is a staple of financial planning. “Cash flow” means the flow of currency into and out of the business. A cash flow forecast, in the simplest terms, is an estimate of how much cash your business will bring in and how much it will spend over a given period of time.

The forecast should be based on your business plan and your projections for income and expense.

4. Monitor daily cash flow

To properly manage your company’s finances, you need to know all about your cash flow. It is important to monitor your revenue and your expenses.

As you monitor your revenue, you can ensure that you are continuing to get new business and that you’re collecting payments on the services you provide. As you monitor your expenses, you can make sure that your company has enough money to pay bills and pay employees.

5. Speed up cash inflows

When you are running a small business, cash flow is key. If your business has a negative cash flow, you could be in big trouble.

For example, if you have clients who are late on their payments, pay for credit card processing, layout money for finding new clients, or pay for any kind of marketing to drum up new business. Any of these situations could be a cash flow killer.

Any business or company that has been in operation for any length of time will have a substantial amount of assets. These assets can be in the form of cash, equipment, inventory, patents, and copyrights. What many business owners don’t realize is that they don’t always have to own these assets.

It is possible to outsource the ownership of assets to other companies, which can then rent the assets back to you. This will allow your business to generate cash flow in the short term and may even save you money over the long term if the rate of return on your assets is higher than the rental rate.

Speed up cash inflows

6. Improve receivables

Receivables are loans and amounts you are owed but not paid out. It is the money your customers owe you but haven’t paid yet.

Getting these receivables collected faster is one of the best ways to manage company cash flow and assets.  You can do this by improving customer relationships, offering discounts, or through more forceful collection methods.

There are many ways to manage company cash flow and assets, and each method will have varying effects on your cash flow. However, it is always good to know your options and be prepared for any financial emergency.

7. Manage payables

It’s best to keep track of all outstanding invoices and make sure you pay them on time. The best way to manage your payables is to create a spreadsheet and put in your outstanding invoices.

You should include all of the details about the invoice, such as the date it was created, the date it is due, the amount due, and the contact information of the company. If you miss a payment, the company may charge you a late fee, or worse, they could report you to a collection agency.

If you don’t pay on time, the company has the right to refuse to work with you again. This can lead to a bad reputation and a lot of trouble in the future.

8. Automate financial consolidation

Despite the importance of the financial performance of a business, the majority of the small businesses in the US, UK, and Australia are not making use of financial consolidation systems.

According to a survey conducted by the UK’s Financial Management Solutions (FMS), about 80 per cent of the small businesses in the UK are still not doing finances manually. Well, there are several reasons for this, but most of them relate to the lack of time. However, if you are running a small business, you should know that there is a better and faster way to manage your finances and financial reports.

Consolidating financial statements manually is a nightmare. For example, if a company’s financial statements are audited and consolidated by a third-party accountant. The accountant has access to your financial systems and uses a spreadsheet to manually consolidate data (i.e., to add up all the individual accounts to produce a complete picture).

As you can imagine, this is a very time-consuming process, especially as you have offices in several countries and have to report on 10+ different currencies. The accountant also needs to use different spreadsheets to consolidate data for different purposes. This makes it difficult for management to get the information required for financial reporting and decision-making quickly.

Cut overhead to reduce operating costs

9. Cut overhead to reduce operating costs

When a company is in financial trouble, especially if it is small, it needs to make sure its overhead is as low as possible. In short, it needs to try to cut its overhead.

Cutting overhead is a great first step when you are in need of raising cash. Management can cut spending on company cars, business lunches, and entertainment. They can also cut travel expenses, like hotel and airfare costs. They can cut down on employee salaries and benefits or hire new employees. They can even sell off office equipment or assets.

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