Is your business at the embryonic stage? Probably you might have tested the feasibility of the business idea and drafted a detailed business plan to implement it. If you are a solo investor of the company, it is not possible to set up and run the business with profits. You need to have some external financial assistance if you are not maintaining good cash flow of the business. Here are some tips to help you with cash maintenance and grow your business.
Keep set up cost as low as possible
Initiating the business is not just about setting it up to implement your unique ideas, you need to make an efforts to grow it further with the right business decisions that need funding to implement at the right time. Business investment is divided into two parts, one for the setup purpose and the other for working capital. It is very important to keep your business set up investments low. Choosing to go by shared office space in Noida is one of the best strategies to lowdown your set up costs. The rest you can be used to fund your working capital and grow your business.
Have a cash flow projection
When you are running a small business that needs excellent funding to grow it further, it is must for you to have a cash flow projection for your business. It will give you a realistic estimate of inflow and outflow of cash in your business. You will have a record of expenses paid and income left for your business after it. You will be able to anticipate the cash needs of your business months and weeks ahead of its need and take appropriate action.
Categorize your short term and long term goals
Every business will have both short term and long term goals. Short term goals are aimed at making emergency purchases or bridging the gap between payables and receivables. Long term goals will be something like equipment purchases, buying a building for running business operations. Take income out to meet your short term goals and avail loans to address the long term ones. If you feel that investing in building purchase is not an option at the embryonic stage of the business, you can choose to go by renting shared office space in Noida.
Keep Cash in Reserve
Any business should have cash in hand to pay the bills in the event of a downward dip. If you are establishing a business, a reserve of 3 to 6 months is recommended. You should be more conservative. The right amount of reserve your business needs can be decided on the cash you have spent in the past and anticipated cash needs in future.
Recovery of receivables
Receivables is the main key for maintaining good cash flow in the business. You should bill early and collect early to maintain good receivables. You should guard against the late payments. Generate invoices as soon as goods are delivered to follow up them early to receive payments. If your making order for the customer, it is a good idea to ask for some deposit upfront and ask for a percentage of payments on reaching each milestone to maintain the better cash flow of the business. Keep in contact with the customers so that you don’t lose track of your follow up.
Liquidate Cash Tied Up With Assets
Sometimes businesses will be held up with the assets you will no longer use. If the inventory of business you becomes obsolete, you can consider selling it to generate some liquid cash. Idle equipment in the business will not only lock your cash but will take up space in your business premises. Raising the cash from the idle equipment in the business will give you a taxable gain that can be reported in your tax filings. If you are selling the asset below the book value, you will gain tax loss which can be compensated against other profits in the business.
Delay Your Payables
Many business owners often neglect this, but it turns to be an effective strategy to maintain better cash flow in the business that helps its growth. You should always figure out a way if you can delay payments without risking late fee and humiliating the relationships.
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