5 Advice in Conserving Your Cash in Business
5 Advice in Conserving Your Cash in Business
Every entrepreneur aspires to run a successful business. However, running a successful business is not a simple task. It may start from one, two, three but the actual work requires a serious business plan, solid cash flow, well-planned management, and a competent workforce. The concept of business cash flow is one of the basic concepts in business that every entrepreneur should know and master. In order for a business to grow and become successful, the cash flowing into the business must always be more than the cash flowing out of it. Although this is a basic concept, many businessmen have trouble following this, for so many reasons. That is why, especially last 2020, a significant number of businesses were bleeding and the others were forced to shut down.
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Before we start, watch this video for the cash flow basics:
Sell Obsolete Capital Equipment
As we make a dramatic shift in the business today, many capital equipments is no longer needed in the business. As we move to a full-online working set-up, it is time to let go of the office spaces and other office equipment. In addition, technology changed the customer requirement in business. Thus, it is also time to sell the old materials and equipment in exchange for a modern one. In the present where everything is dynamic, a businessman should be flexible enough to let go and learn new things to save and grow the business. What are you waiting for? Start the inventory now and convert those obsolete capital equipment into cash.
Enter Payment Contracts
Your cash flow in the business is a science and art, where you need to manipulate it in a strategic way. It needs a higher level of thinking because one wrong move, it could backfire and would hurt your business twice. As a businessman, public relations is a must. Establish rapport with your customers as well as your suppliers. Conserve your cash by convincing them to enter with different payment contracts with you. Negotiate with them and ask them to sign-up into contracts. For your suppliers, you can ask them a friendly payment term for goods like, a month after delivery and for your customers or clients you can ask them for a payment-first scheme or come up with promos. By this, you can sell and earn cash even before its payment time for the suppliers. You do not flow out cash for supplies and you flow in cash before you deliver.
Invest your Cash in Interest Earning Investments
Smart investments are in need right now. In 2021, money should not be sleeping in the drawer. As a business owner, you need to save while you earn. Thus, investing your cash in interest-bearing accounts is a smart choice. You can do this by signing-up to banks that are offering credit card services with rebates. Start using your credit card with their partner merchants for your business supplies or online business transactions. See, you can earn rebates while your business is growing. You can also try short-term certificates of deposits (CD) and penalty-free CDs.
When you build your cash flow, it should be fast, check this out:
Give Discounts for Early Payments
Keep your cash flow viable and stable by giving out discounts to your early payers. Prompt payments should be rewarded to encourage your clients to pay on time or earlier. You can offer as much as 2% for payments made 10 days before the due date. Like any person, clients love discounts as they can also save money. On your side, you can prevent the existence of bad debts.
Post Penalties for Late Payments
If there is a reward for early payments, of course late payments should be sanctioned. Every businessman wants to maintain a harmonious relationship with his clients. However, if it puts the business in an uncertain position, the interest of the business should be put first. Before entering into contracts with clients, make everything clear from the start. Establish a policy that early payments have discounts while late payments have interest as penalties. This would look hard but at the end of the day, business is business and you need to conserve your cash.
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