Cash is the most liquid among the resources your business could have. It is the most conveyable and most efficient consideration for every transaction you will get into in carrying out your business. But because of the slumping global economic condition, you had an unfavorable cash flow. A better panorama of cash flow is an indication of a high liquidity status of a certain person or business. It also attracts creditors and investors. Now, if you are a bit frustrated and disappointed on the flow of you cash, the following are seven simple and direct tips you can do to improve how your cash runs.

1. Collect receivables. Strengthen your collection effort on your accounts receivables. Give discounts and other rewards to encourage early payments from your customers. Sending demand letters is also one way to knock your debtors to act on paying their debts on you.

2. Purchase through accounts payable. Purchasing on account is not like obtaining a loan which gives you high interest rates. Purchasing your inventory or services is usually free of interest and collateral. Good long-term relationship and loyalty can also exist between you and your suppliers in dealing charge purchases.

3. Increase sales. The easiest way to increase your sales is to increase your prices. If you think it is reasonable to increase your selling price and it will not have a significant effect on the counting of your customers – then go for it! Other ways to increase your sales is through effective and efficient product promotion. There are lots of cheap advertising strategies that can pull more sales to your pocket. Online marketing, text message marketing, etc. are some of those cheap but nice promotions you can do to augment your sales. But be sure to always preserve the name and reputation of your business.

4. Reduce cost or expenses. If you realize that you are overspending, then cut it down immediately! Cut down those unwise and unreasonable expenses you are incurring. Excessive marketing costs that are ineffective, extravagant representation and entertainment expenses and other impractical and untimely expenses should be stopped. You can also dispose and sell any assets you owned that do not generate income but only give you fixed expenses. Example of these are idle building space which you pays for monthly fixed rentals and fully depreciated assets that don’t contribute income but only give you repairs and maintenance expense.

5. Get and use funds wisely. Obtaining loan and investing your money is good for your cash flow, because it will increase your current cash level. But be sure that you will use these funds for a definite return so that it will not exhaust your cash in the future for paying debts out of your capacity. Obtain loans and investments according to your usage. If you need cash to enhance your operation, then welcoming short-term creditors and investors are nice. On the other hand, if you want to use cash for the acquisition of long-term assets, then obtaining cash from long-term debt or investment is fine.

6. Grab discounts and rewards. Saving is great in improving your cash flow. And grabbing discounts to lessen your cash payments is a wise move.

7. Monitor your financial ratios. Financial wisdom is the most important key to improve your cash flow. And to gain this wisdom, you will need the right amount financial information. Your financial ratios (liquidity ratio, solvency ratio, profitability ratio, et cetera) can give you light on how to manage your cash flow. Your quick asset and current asset ratio can help you in making decisions and actions on how to deal with your current assets (cash, accounts receivable, short-term investments, and other current assets) and current liabilities (accounts payable, accrued expenses, short-term loans and other current liabilities). The receivable turnover ratio, for example, will also tell you if you are efficient or not in collecting your receivables. These pieces of financial information are very important in understanding the flow of you cash and your business as a whole. Hence, you should always find ways to look for them and try to embrace them with your wisdom and enthusiasm.

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