The 6 Way$ To Unlock Cash In Your Small Business

INTRODUCTION:

The single biggest worry for most business owners is their ability to have cash in the bank to keep things going. Michael Gerber in his book E-Myth Mastery shows how easy it is to dumb this right down and why it is important to understand the 6 ways to generate cash into your operations.

Here is a brief summary of the main ways you can generate cash for your business.

Figure 1: More cash in the bank - now you have my attention!

1. Decrease Non-Cash Assets

Getting rid of assets to raise cash is not always the wisest thing to do but if the business has assets it doesn't need then why not free up some cash. It could some old plant and equipment or maybe some old stock.

2. Increase Liabilities Or Capital

Borrowing some money or getting an investor in to inject some cash is a way to improve your liquidity but remember this will only be a short term solution if the business is not profitable or it does not quickly convert its profits into cash.

Figure 2: More cash! Yeah baby!!!

3. Increase Revenues

The idea to increase revenues is to to increase profits but again you need to be careful to convert these into receipts very quickly.

4. Decrease Cash Expenses

When was the last time you reviewed your suppliers and overheads to make sure you were getting good value for money. This also includes checking the rates of interest your bank might be charging. The old saying "Ask and you shall receive" has never been more relevant as many suppliers take their customers for granted and it would be extremely rare for them to contact you and say I think we can give you a better deal!

5. Improve Productivity

Do you have the right equipment or is it old and slow requiring maintenance? Are staff being efficient or have ways been explored to do things faster, easier and with better quality?

6. OPtimise Timing Of REceipts & Disbursements

This is where when you sit down with your small business accountants Sydney & Dubbo and you do your cash flow forecasts (three way budgets) to look at how you can improve your timing pf receipts and payments.

Improve your receipts by:

• reducing debtor days (decreasing payment terms, putting on a debtors clerk, sending reminders etc);
• reducing inventory days (turn stock over more quickly or purchase at start of the month to increase time to pay to suppliers);
• Asking for longer supplier terms;
• Buying major purchases that have GST just before your BAS is due to be lodged; or
• Making major sales with GST at the early on in the relevant BAS period.

CONCLUSION:

If you feel that you don't seem to have a lot of money on hand with your business, sit down and work your way through these 6 simple concepts. Ask your small business accountant to help you to monitor these areas at least on a quarterly basis and then measure whether you are making improvements.

Cash is king. Your busines growth and ability to survive depends on it.