Business rescue operations is an integrative process which aims at recuperating whatever money is being lost in the operation of your company; might as well say it is all about cash flow. In simpler terms, this is the turning around of your business’ financial distress, making it reach financial equilibrium. With that said, how important is cash flow during these moments?
Well these pointers may help you grasp the idea: Importance of cash flow in business rescue operations
- It boosts your purchasing power – despite the fact that you are experiencing financial woes, purchasing items will not stop.
- It helps you pay debt (which is inevitable) – debt is like second nature to most companies, but it can be removed through careful payment and allocation of profit to balance asset-debt ratio.
- You’d spend more than half of your time collecting money – or the payment. Your customers commend you for the service they used or product they bought. Thus, you have the possibility of gaining loyal buyers.
- You will always be advised to tighten it – most experts would have to agree at one point: your cash flow is close to repletion that you seek their assistance.
- You have to pay employees! – even if you’re just operating a small time company, if you have a working staff, their salaries mustn’t stop regardless of how bad your business’ financial standing is.
- Advertising is unavoidable – if you want to lead customers into actually doing business with you and increase chances of profit that will also add up to your cash flow, you need to market your goods like a pro.
With all these importance, how does a financial expert help a small business in such dilemmas? They free up some cash! But how do they do it?
Keep the money for business purposes – most small businesses struggle to delineate personal and business expenses. So at times, owners spend business money where it is not allocated for. Avoid using your company’s profit for non-essential items or for entertainment purposes. At most, keep it heavily segregated.
Do some projections – by forecasting some future cash flow, your advisor may know how much cash will be made at a certain point and how you can manage them even before you got your hands on it. Once you know the figures, you can also set your company’s aims toward achieving that goal.
Heavy analysis – they may analyze your company’s working capital, management practices and metrics just to make sure that they can give recommendations on what to focus on and what to change in your styles of handling money. This is done to identify core problems that will in turn personalize the way solutions will be formulated.
Execute plans – they do this with utmost care. And they also do whatever has been agreed upon from initial analysis.
Spending cuts– if you’re small, chances are your expenditures will also be minimal. It is advised that you spend as little as possible and save up on inventory. Also, avoid buying irrelevant things and only buy items that you will immediately need for operations.
Reduce accounts receivable – when you’re in the business of selling, make sure you know how to ask for deposits and avoid slow stock turnover by enhancing your pre-sales terms and conditions.
To make the long story short and with all the importance and strategies written to free cash and manage cash flow, it can also be described now as your company’s life blood. Much like how human blood keeps people alive, giving enough oxygen in every corner of the body. Without it, your business would experience a tragic death. That is why the number one strategy for business rescue operations is salvaging whatever’s left of a good cash flow.
But unlike blood which needs medical attention, cash flow management needs financial expertise. You can always have the option of doing it by yourself but opting to hire financial advisors to lend you a hand is also a viable choice. At least the latter can bring about proven results when you need it.
At Business Rescue, we go the next step further, we make business turnaround operations affordable by offering our unique Do It Yourself method. Learn how to perform your own business turnaround and it only costs $1 to get started.