7 Cash Flow Improvements
Have you ever heard of people finding money? Not the kind that blows past you in the parking lot, but money you have already made and received. You’ve now figured out how to keep, repurpose, or leverage in a way that impacts your bottom line, which allows you to maximize your money. If you are interested in discovering ways to improve the usage of cash that create benefits in the long run, you’ve come to the right place. Let’s take this from the top, shall we?
Cash flow is defined as the total amount of cash transferred into and out of your accounts. At the basic level, the ability of an individual or company to create value for stakeholders (those who have an interest in any decision, activity, or outcome) is measured by its ability to generate a positive flow of cash. Cash flow refers to the measure of the income you take in, minus the funds you pay out. Ideally, you have cash left over toward the end of the period, and the more cash you have leftover, the better! That money can be put aside for the future, invested to create a passive income, or applied to additional debt installments.
Cash flow indicates that a company is adding to its cash reserves, allowing itself to invest back into the company. To actively contribute to savings and invest, there has to be an excess of cash. It also means the company is able to pay out money to shareholders and settling future debt payments. There are three forms of cash flow: operating, investing, and financing. There’s an additional term referred to as Free Cash Flow, commonly used by analysts to assess a company’s profitability, as it represents the cash a company generates after accounting for the cash outflow (expenses). This is done to support operations and maintain its capital assets. How can you make your cash flow more efficiently? Businesses, as well as individuals, certainly need cash flow to profit and make improvements every day. I have uncovered 7 ways to create and improve your overall cash flow:
1. Refinance Debt
Refinancing debts helps save money. Many businesses take the debt with the plans of building out their business, which can sometimes hinder cash flow. One strategy to improve cash flow is to refinance your debts. This can include vehicle loans, mortgages, loans, credit cards, and other debt instruments. Generally, the less interest you are charged, the less you pay over time. When debts are pinching your cash flow, it’s common to feel you will never make money or gain profit. By refinancing your debts, you will be able to observe significant monthly savings that will have major implications on improving your cash flow. Remember, cash flow is the backbone of your business.
By refinancing, you will be able to lower your current monthly debt. You can lower your monthly payments, and this will help free up some cash.
2. Pay down debts
If you are thinking of saving money and not focusing on paying your down debt, you will pay more money in credit card interest charges in the long run. As credit card interest rates are mostly higher than savings interest rates, you end up contributing more money out of pocket on debt-related interest payments. Paying off your debts first will help you pay them off earlier and also pay a lesser amount overall. Your debt-to-income ratio will improve with a lower outstanding balance and create more financing opportunities in the future. Your goal must be to first get rid of the shackles of debt and then to start saving. Pay down debts first to improve your cash flow of the business.
3. Reduce Expenses/Overhead
As a business owner trying to improve cash flow, you must first reduce your overhead expenses. Unnecessary spending must be stopped or controlled. Start by determining where your extra money is being spent. First, review your rent or mortgage. Try negotiating a lower payment/installment with your creditors to improve your cash flow. If you see that your home/office space is too much for you, then move to a smaller space. Next, implement energy efficiency improvements in your home and workspace. All of these things can create an impact on the total monthly bills. Also, consider having a keen look at expenses going into travel and entertainment. Reduce anywhere you think you are overspending, have variable expenses, or that spending is attacking your cash flow.
4. Increase Your Income/Revenue
Increasing your income is a must if you are thinking of making your cash flow better. Many people don't focus on this side of the cash flow improvement, as it seems too much to do. There are many options to increase your income or revenue. You can start a side hustle job or business. You can spend time developing a new revenue stream or earning a certification that will result in added income. Or, if you have a business, then you must think of making improvements in your current revenue – ways you can efficiently lower costs and reach more people.
5. Control Investments/Inventory
Effective inventory-control helps your cash flow. Similarly, bad stock administration will prompt extra costs and more cash flow issues. Holding inventory is unavoidable. However, holding an excess of inventory stock ties up cash that could be allocated to different parts of the business. Besides the initial expense of stock, you additionally bear the ongoing expenses of holding that stock and keeping it in a sale-able condition. On the personal side, this may be purchasing additional vehicles when you only drive one vehicle at a time or buying clothing/jewelry just to have it.
The ideal approach to improve cash flow and productivity is through inventory control. Inventory creates cash flow; however, buying inventory requires a cash expense that influences the cash balance. An expansion in inventory stock will show up as a negative sum in the cash flow articulation, demonstrating a cash cost or that a business has bought a bigger number of merchandise than it has sold. Yet, if inventory stock diminishes, the decrease in inventory stock will appear as a positive-sum on the cash flow articulation.
6. Collecting Receivables/Money Owed
Cash flow is also positively impacted by collecting receivables and money owed wherever you have it. You can go back to all the people you have to collect receivables from and get the cash back. This will add up to the company’s overall cash and help you improve your company’s cash flow. You have to know the value of your invoices in your accounts receivable account. It is essential to realize who owes you, and when the cash is expected. There are bookkeeping frameworks that make this simpler by following state-of-the-art receivable apps and helping you to remember past-due installments.
7. Reduce Risks/Exposure
You can improve your cash flow by reducing the risk and exposure you or your company faces. You can make improvements, such as investing in automation and AI, optimizing your cash flow, optimizing your outgoing cash flows, etc. These methods will help your cash flow without any risk or exposure to the business situation. You can try investing in tools and techniques that you need for managing cash-risk effectively.
All these methods will help you improve the cash flow situation for your company and your personal situation as well. You can also use the following opportunity for a better cash flow situation. Click Here to grab the Time of the Essence Bundle today and begin creating better habits to achieve your goals faster and more effectively.