A company’s cash flow can play a variety of roles in their business. It can be the driving force of growth, leading to success and increased capital strength. Or, conversely, cash flow can be the primary factor in a company’s demise. For this reason, it is imperative that companies know how to manage their cash and, furthermore, maximize it.
When assessing your company’s capital health and in which areas to improve, it’s easy to look to surface factors as indicators. While customer fluctuation and price changes impact cash flow, there are many other day-to-day elements that may be hurting your capital position. You should consider your current reoccurring business activities, their productivity, and their cash usage. These hidden cash-leaks can become engrained in your company functions and damage your capital strength without you even realizing.
So what’s the good news? These cash-leaks can be turned into cash-optimizers. Here are 7 tips on where to look for your concealed capital problems and how to change them to make your cash flow more efficient. To read more on improving your company’s cash management and availability, download our “Cash Flow Is Your Unfair Advantage” report.
1. Move to an Electronic Collection System
• Eliminate paper checks and cash
• Prevent paper-related fraud
• Use incoming cash more quickly
• Transfer money easily
2. Use Remote Deposit Capture (RDC)
• Save time by eliminating visits to the bank
• Save money by minimizing transportation costs
• Make deposits immediately upon receipt
• Improve cash position by speeding up availability of deposits
3. Better Manage Your Payables
• Pay at the end of the term
• Consider a credit card for vendor payments & incidentals
• Pay credit card statement in full at end of every term
• Use credit card rewards to benefit your business
4. Renegotiate Vendor Terms
• Evaluate terms periodically, even with long-term partners
• Be creative to find favorable terms on key points
• Improve your cash position
• Ask your bank partner for ideas – we’ve seen a lot!
5. Improve Inventory Management
• Be sure you have a program in place
• Consider a First-In, First-Out program
• Review sales projections and order frequency
• Identify causes of obsolete stock
6. Mine Your Management Reports
• Dive deeper into reports liked aged receivables and inventory
• Look for new insights (like regional product preferences)
• Identify most – and least – profitable products and services
• Track sales trends to help with forecasting and inventory management
7. Improve Your Forecasting
• Identify important considerations like seasonal fluctuations
• Stay on top of market trends and competitors
• Manage expenses and collect revenue in a timely manner
• Reduce inventory costs
• Get internal buy-in for your efforts
• Create an “efficiency mindset” with your team
• Run everything through the “effort-to-benefit ratio” test to ensure there is enough financial benefit to make initiatives worthwhile
• Talk to your banker – we can help!
Now that you’ve read the tips, don’t miss out on the full “Cash Flow Is Your Unfair Advantage” report or contact a local business banking specialist today with questions.
Phoenix: Arnold Otero, (602) 824-5736, firstname.lastname@example.org
Scottsdale: Julie Fletcher, (602) 308-4417, email@example.com