Seven quick tips to grow your cash flows
By Liz Nkukuu | August 18th 2021
“Revenue is vanity, profit is sanity, but cash is king.” Unknown
Have you ever come across people who are very asset-rich but cash-poor such that they are unable to meet some of their expenses within a short period of time? The profits only make sense if they translate to money in their bank account. Most people who have run successful businesses capitalise on the cash flowing into the business as it can help them easily qualify for a bank loan.
As renowned business magnate, investor and author Sir Richard Branson said: “Never take your eyes off the cash flow because it’s the lifeblood of business.” Running a profitable venture definitely results in a path towards a much better cash flow.
However, if your revenues were largely on credit and your cost of sales is to be paid upfront, then you will eventually run into trouble as you might not be able to stock your goods at the right time. One of the biggest causes of market and corporation crashes is largely due to the lack of money in circulation. This has been evident, especially during the Covid-19 pandemic where the government has eased out the monetary policies and put money in the hands of the citizens.
What measures can one put in place in order to grow their cash flows?
Increase the source of income
Whether in a business or an individual, the ability to rely on multiple sources of income helps with the growth of the overall available cashflows. Always think about monetising your hobbies and even diversifying your business.
Reduce the overall expenses
It is important to classify one’s expenses and doing away with the unnecessary expenses or expenses that are not urgent. Creating a good budget plan is a key starting point in determining what expenses are discretionary and which ones are not.
Whether employed or running a business, filing tax returns is paramount. When one acquires the right structure for running a business, this helps in ensuring that you reduce the number of tax expenditures that you have to payout.
Delay paying bills and be aggressive on collections
If you are in business, you can negotiate longer payment cycles with your suppliers and push for faster collections with your clients. Initially, aggression with collections may sound unreasonable but in most cases the clients usually understand. While they are getting more value from the goods and services, they shall respectively pay on time.
Diversify sources of funding
Things may go wrong once in a while. It is always good to have various stand-by options at your disposal for accessing other forms of funding in form of equity investors and also debt funding.
Compliance with the law
It is imperative for a taxpayer to make decisions in complying with tax laws and regulations timely and accurately. Avoiding delays in submission will ensure that cost of fines is minimized.
Choosing the right investment assets
Understanding the investment properties of what we invest in is of utmost importance since most products have different characteristics. Even while investing in the same asset, class is good to ensure that one selects the right security.
Like anything worthwhile, cash flow management needs to be done in a systematic way. One cannot run their life or even their business without knowing how much cash they need and they have. There are also opportunities that come our way and the only way to seize them is when we have ready cash.
Elizabeth Nkukuu is the Team Lead- Liz Consulting.
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