Every business needs cash in hand to operate sustainably in the long term.
Knowing how to manage a company’s capital well means knowing how to weather crises, deal with emergencies, meet the company’s needs and also invest in the company’s growth.
If you want to know how to never run out of cash in your organization, just continue reading and pay attention to the valuable tips we have for you!
NO Cash at the end
According to IBGE, 21% of companies close their doors after the first year and 60% do not survive for five years.
Among the drivers of this frightening statistic is the lack of financial planning and organization.
Even with predictable revenue, a business has several variables to sustain itself. If there is an unforeseen event or emergency and you do not have cash on hand to use, the company may suffer countless losses, such as:
- Contracting debts with high interest rates;
- Revocation of the license;
- Law Suit;
- Fines;
- Loss of customers;
- Loss of goods.
BALANCE IN THE CASH REGISTER
A balance in the cash register means growing, maintaining and protecting a business.
Firstly, unforeseen events can occur, and if you are not prepared to resolve them as quickly as possible, you may suffer major losses in your business.
So, having cash in hand maintains the security and financial health of your company.
Furthermore, working capital is essential to maintain the operation of the business and ensure the payment of bills, employees and other expenses.
KEY POINTS OF CASH FLOW
A business always has money coming in and going out — a movement of money called cash flow.
For instance, it is indicative that the company’s financial health is not good if there is more money going out than coming in.
There are also some terminologies and variables that you need to know to be able to manage your finances effectively. They are:
Bills to pay
These are all of your company’s expenses and financial obligations, such as employee salaries, taxes, electricity, internet, suppliers, among others. They can be both fixed and variable expenses.
Bills to receive
These are the amounts that your customers have to pay for your business, that is, all of the company’s income.
Box
It is the money available at the moment; that is, the balance that could be withdrawn today to pay for an emergency, for example.
Profit
It is what is left after the expenses and financial obligations that the company has been removed from the input. In other words, it is the input value minus the output value.
Working capital
It is the resource your company has to cover its costs and stay in operation.
Working capital is not synonymous with profit; it’s not everything that’s left over after expenses are subtracted, but rather that part of your cash inflow that a business uses to pay for things.
FIVE TIPS SO YOU’LL NEVER RUN OUT OF CASH
One part of it should be invested in a cash reserve for maintenance of expenses, emergency response, and fueling the growth of your business.
In that sense, we picked some strategies to help ensure you never run out of money. Check them out:
1. Record everything
Recording all income and expenses is the first step towards good financial management.
By putting everything down on paper, it becomes easier to take a closer look at your business’s financial situation—what expenses can be cut out and what’s really pulling in the money.
These days, there are many ways to log business cash flow using technology: spreadsheets, apps, websites or programs. The important thing is knowing exactly how much is coming in and going out.
2. Cut costs and save
Seek to keep your business as economical as possible, reducing your costs without compromising the quality of your products or services.
Also remember to never forget to pay your bills on time in order not to suffer from interest, besides setting up a culture of savings within the team.
3. Be good at negotiation
When talking about saving money, negotiation might be one of the possible ways of reducing costs with suppliers through agreements. That being said, it is right to make use of good negotiation tactics, such as.
- Don’t accept the first offer;
- Think about possible offers before the conversation;
- Seek to strike a compromise between the two;
- Hold off until the other person has completed speaking.
Furthermore, make a list of suppliers and prices and give preference to buying wholesale to get good discounts.
4. Optimize processes
Did you know that the saying is “time is money?” That said, streamlining the process at your company can also save you money.
For that, it is important to train your team well, so the analysis of what the processes of your company are today will try to help them to run faster and with less bureaucracy.
5. Invest in customer relationships
Basically, it is much more economical to retain one customer than to attract a new customer, as it costs more to attract new consumers than to retain an old one.
So, invest in relationship strategies, such as:
- Quality service;
- Promotions and discounts;
- Loyalty card.
