I always get heart stopping moments when I see my cash going our faster than sales coming in. It gives me the dreaded thought of closing shop, and do I spend sleepless nights thinking how to increase it and where to get more. The last one happened several years ago when what I have left in the bank could no longer pay for the month end expenses. That time I realized the cash is king and that I always need to have plenty of it in the bank. I don’t want you to go through sleepless nights so I am writing this article that will talk about growing your cash (I also use the techniques in my business).
Cash is important to all types and sizes of businesses. You use cash to pay for salary, rent, raw materials and other expenses needed to keep the business running. If you run out of cash your business will halt and wait till you have cash to pay for your dues.
Before getting a loan, try increasing your cash by doing the techniques below:
Receivables are claims (in form of cash) from customers you have served ahead of time. In others words, these customers will pay you after they have received your product or service. You have to keep good track of your receivables so when times comes you need cash, you can collect.
Ask for extended payment terms from your suppliers.
Suppliers, most specially those you have good relationship with, give you certain number of days before paying them. So that you have cash to pay for immediate expenses, you can ask your supplier to extend the payment terms but this does not mean you have to keep on delaying the due date.
Go on sale.
If you are in bad need of cash, you can go on sale. You can give discounts to your customers just to increase you cash position.
Ask for Pre-payment.
If you do not want to spend your cash for inventory or raw materials, you can ask your customers to pay you ahead of time. You will then use the money to buy the products they want. You will see this technique with online sellers where they ask for deposit if you want to pre-order their goods.
Cash is the lifeblood of any business, without it your business will close down. Being aware early of your cash position is the key to keeping your business alive, so make sure you keep a record and employ quickly the techniques I have put above when you start running out of cash.
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