Being an entrepreneur, you are aware that cash is the lifeline of your business establishment. You need to go out of your way to ensure that there is a constant flow of money in your business at any point of time. Otherwise, you may face problems paying your suppliers for the raw materials you purchase and your employees. In addition to this, you have to incur certain necessary operating expenses. In fact,finance experts say a cash crunch situation has the potential to stall the expansion of your organization’s business operations in the marketplace.
Anju Vallabhaneni – Ways to enhance your Organization’s Cash Flow Position?
Anju Vallabhaneni is a former Chief Executive Officer of United Software Group, Inc. He says you can enhance your organization’s cash inflow by remembering the following 4 tips:
- Formulate a cash-flow budget
Make a comprehensive list of the expenses you have to incur and people to who have to pay in the course of operating your business during the accounting year. This can include payments to suppliers for the stock your purchase, payroll, loan repayment, rent of premises you use and taxes. Next, you need to write down the sources of your monetary income. This may include cash sales, the money your customers owe you, interest on deposits, income from investments and tax refunds. You then have to deduct your cash outflows from your cash inflows at know how much money you are likely to have at the end of the period.
- Create a feasible payment policy for your customers
To ensure that there is a constant inflow of cash into your business, you need to come up with an effective payment policy for your customers. You need ensure that such payment terms are short without causing any inconvenience to customers. You should be willing to accept various modes of payment from them like plastic money, online transfers, wire payments and checks beside cash. You can also offer your clients special cash discounts when they make prompt payments and penalize slow-paying ones with fines.
- Negotiate favor payment terms from your suppliers
You start negotiating with your suppliers for favorable payment terms in the form of attractive discounts for bulk purchases if you clear their dues with a short period. While many of these business proprietors may agree to this proposal, there may be some that may not find this acceptable. You should then ask them if they you allow a period of 90 days to pay the money you owe them for purchases you make.
- Manage your organization’s inventory
You need to conduct a thorough inventory review of the stock of raw materials you hold in your organization. You need to remember that holding too much stock can increase your storage expenses and insurance costs. This can drain on your organization’s cash resources. Again, if your organization does not have enough stock in hand, it can paralyze your business operations.
Anju Vallabhaneni says in addition to executing the above 4 steps, you should find out ways to reduce your organization’s overheads costs. This can help your organization to save a lot of money while conducting its operations. It can also go a long way in improving your organization’s cash flow situation.