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10
Ways to Kick Start Your Cash Flow
by June Campbell
Is
your cash flowing out faster than it's flowing in? This can
happen for a number of reasons and can be a sign that your
business is growing at a faster speed than you are ready to
handle. Perhaps your best customer has given you a $100,000
order -- but you need cash right now to buy the supplies needed
produce the product. Challenges like this one are commonplace
occurrences with businesses of all sizes. Without adequate
operating capital, your ability to grow your business is
limited. When this happens, you need a strategy that will either
infuse your business with some quick cash or reduce your
operating expenses.
Try
one of these:
1.
Hold a Sale
You reduce inventory while brining in some quick cash. Offer a
discount or other incentive to customers who pay now.
2.
Ask for Payment in Advance for Recurring Services
If you are offering web-hosting services, for example, offer one
month free to customers who pay up front for 12 months hosting.
3.
Lease Your Equipment
Purchasing equipment ties up large sums of money. By leasing,
your money is freed up to be used for other purposes. Often it
is possible to lease a variety of equipment -- including office
equipment, computers, software, telecommunications equipment,
vehicles and more.
4.
Joint Venture with Another Business
Find a business offering services or products that are
compatible with your own and offer to promote each other's
business. For example, if you are selling health food products,
offer to cross-promote with a business selling fitness products.
You'll both enjoy increased sales.
5.
Obtain a Line of Credit
Bank credit is usually subject to standard ratios of debt to
equity, working capital and profitability.
6.
Factor Your Accounts Receivable
Sometimes known as "invoice discounting," factoring is
the selling of your invoices (accounts receivable) for cash,
instead of waiting 30-60 days to be paid by your customers.
Businesses of all sizes use this tool -- which is available
through various specialized financial institutions. The funder
buys your receivables at a discount -- leaving you with enhanced
cash flow. Not all invoices will be appropriate for factoring.
The customer must be a low credit risk, there must be evidence
of the transactions (such as a signed delivery waybill) and the
customer must verify that the debt is owed.
7.
Equipment Sale Leasebacks
You can use equipment that you already own to secure financing.
By transferring equipment assets onto an equipment lease, you
can recover up to 100% of the equipment's value. The equipment
remains in your own premises and you can continue to use it. You
must own the equipment free and clear to go this route.
8.
Ask Suppliers for Credit
Or, ask them to extend your credit. Another possibility is to
discuss loan or consignment shipments from your suppliers.
9.
Stop Producing Dated and Low Profit Items
Stick with your core product until sales improve.
10.
Cut Back on Stock or Inventory
Ask suppliers to buy back stock at cost. You will have to allow
them an administrative fee. Order supplies or inventory on an
"as needed" basis. Alternatively, you could contact
other small businesses that stock the same inventory as you do
and discuss the possibility of bulk purchasing.
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