As a business owner, keeping your enterprise healthy and growing is a top goal. Business liquidity and cash flow management make that possible. A positive cash flow means you have more money coming in than going out. Those cash funds are your liquidity.
The liquidity generated by a positive business cash flow can help you sustain operations and take advantage of growth opportunities when they arise. It also means your business can make efficient, on-time payments to suppliers, employees, landlords, vendors, and partners. That speaks highly of your creditworthiness and financial strength.
Here are some best practices for improving cash flow management and strengthening liquidity:
1. Create a realistic cash flow budget. Unexpected dips in sales happen, as do disasters, fraud-driven losses, and more. Forecasting your company’s financial health via a cash flow budget helps you plan and strategize how to meet anticipated and unanticipated expenses. To create a realistic cash flow budget, stay informed about your industry and its trends, and seek help from experienced financial professionals.
2. Embrace electronic payments. An important part of cash flow management is optimizing payables and receivables. You can do that and avoid high fees, easily track transactions, and make payments more secure and reliable than paper checks through the Automated Clearing House (ACH) Network. Moving funds electronically through the centralized ACH Network can drive efficiency and convenience for business activities, including:
- Direct deposit of employee payroll
- Electronic transfer of invoice payments to suppliers
- Direct debit for recurring transactions
- Initiation of federal, state, and municipal tax payments
- Conversion of consumer checks into ACH debit transaction
3. Close the invoice-collections gap. Along with the ACH Network, other electronic payment systems like merchant services can help accelerate transaction settlements and funds availability, and allow you to track and manage receivables more easily. Electronic payment solutions accelerate revenue collection and conversion to cash; reduce your business’s reliance on costly and time-consuming paper processes; and optimize your working capital through improved cash management.
4. Do away with unproductive assets. Inventory your assets and determine if they are generating revenue or costing you money to store or maintain. Don’t hold on to assets such as equipment, vehicles, or buildings unless they are actively generating revenue for your company or you have immediate plans for their moneymaking use.
The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.
Brought to you by Nu Direction Lending, a digital-first business lender that was formed and is funded by credit unions. To learn more about cash management and liquidity strategies, visit nudirectionlending.com or contact us by email at firstname.lastname@example.org or by phone at 866-354-7151.
Nu Direction Lending is a digital-first business lender that was formed and is funded by credit unions. We combine the speed and convenience of online lenders with the personalized touch of the local credit unions who help fuel our local economies.