As an entrepreneur, one of the key factors that keep a business running is liquid cash (operating capital). With cash flow, the business will always be in a position to pay suppliers, meet payroll and pay for other expenses that come with running the business.
However, many business owners sometimes go without cash inflow into the business. This is always often regarded as a sign of financial challenges for the business.
The main reason why businesses get into this position is due to a lack of better methods to conserve cash flow. Conserving cash flow is where a business works to retain its cash position and maximize every available shilling without misusing any single cent.
Conserving cash flow in a business is not easy, that’s why many entrepreneurs fail. Cash conservation is something that business owners should learn.
As a matter of fact a business can increase cash flow and maximize profits at the same time. In my article I will pause some advices on how to realize this.
Many businesses deal with vendors who supply the business with goods and services. As an entrepreneur, it’s essential to ensure that cash flow in the business is maintained at a specific level for running the business. If you have vendors that you have established a good working relationship with, try to negotiate a lengthy repayment period with them so that the cash can be put back into the business. This will act as a double-edged sword - making profits, at the same time keeping your business debt free.
If you are in need of any equipment, you would rather lease it from a company instead of buying a new one especially if you need it temporarily. This is a measure meant to conserve cash since obviously leasing is far cheaper compared to going for new equipment. This is a very good strategy to conserve your company’s cash. If the products are sold, it means that more profits would be made since the costs of leasing equipment are more cost effective.
Instead of paying for everything that is supplied to the business using cash, it would be a wise idea for every entrepreneur to try and exchange products for products. Look out for vendors who are also in need of certain products and supply the products to them in exchange of products that you lack to run your business smoothly. By exchanging products for other products( barter trade), it means that you will be able to conserve cash in the business.
Before purchasing any new equipment, it is good to do some research on whether you can get the same machine which has been used but it is still in good condition. Buying used machinery is much cheaper compared to purchasing new ones - a better way to save cash.
However, instead of buying new equipment every now and then, it is good to invest in the current ones that you have. You need to have a regular maintenance program for all machinery that the business currently has. This will go a very long way in minimizing unnecessary costs that would otherwise have been incurred by the business by buying new equipment every time.
One of the major factors that could really drown your cash flow is by having too many employees in your business. Instead of employing new individuals whenever the business expands, it is advisable to utilize the potential that the current employees have to their maximum potential. Before you hire a new employee into the business, it would be great to weigh both the pros and cons of taking such an action. If the pros lead the race, then go for it but if not, stop that decision and work with what you have. This will help you retain cash flow in the business.
As a business owner, it is good to resist the temptation to buy new equipment or hire additional employees so as to conserve cash flow for the business. We all know that maintaining steady cash flow in any business is very difficult. However, as discussed above, you will definitely be able to improve your company’s bottom line and the overall success of the business