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The hype around the startup ecosystem is great, but you cannot ignore the reality that 90% of these businesses fail. One major reason behind this failure is poor cash flow management, which pushes businesses to the edge.
No matter the size or scale of your business, you must monitor the inflow and outflow of cash regularly. This is the tool you need to make informed business decisions that will take your business to greater heights.
Is your business also suffering due to improper cash flow management? Don’t worry—we have a couple of fixes! Here, we will explore the strategic importance of proper cash flow management and how it can benefit your business.
Cash flow management is not that complicated when you take the right approach. It is all about planning, tracking, and controlling the cash moving into and out of your business.
This means predicting the need for cash in the future and ensuring you have the necessary funds to get by. It also includes managing any excess cash to maximise its value and grow the business.
Now that you better understand the importance of cash flow management for your business, it is time to explore the relevant best practices. These unique approaches will help you get the most out of your cash and foster long-term growth.
We are all aware that the business spends most of its cash on paying suppliers. To reduce expenses and increase profits, you need to take an ingenious approach and negotiate better terms with them.
You can focus on increasing the days payable outstanding for less strategic suppliers. This will automatically leave your business with more cash in hand to meet your needs. You can even try to get early payment discounts from suppliers with a strategic partnership that benefits you.
Early discounts are concessions you receive in exchange for clearing the supplier’s invoice early. These discounts ensure you clear all the invoices without default and benefit from the mutually beneficial strategic partnership.
The good thing about this is that even the supplier will prioritise your business while you benefit from proper cash flow monitoring. Your business expenses and costs will reduce significantly, allowing you to make better use of those resources.
Data is key to making informed business decisions that work to your advantage. Internal financial audits will give you valuable insights to help you make the right choices. You will get a better idea of cash holdings, accounting records, and other sensitive financial data.
This will also ensure that you have a clear idea of the business’s financial position. The risk of mismanagement and fraud will also be significantly reduced within the company. Lastly, this will also help identify areas that need enhancements and ensure that you address those pain points properly.
Every entrepreneur knows the struggle behind establishing and running a successful business. But all of that effort will not be of any good unless you have a proper cash flow management mechanism in place.
You must make it a point to get early pay discounts, conduct regular internal audits, and negotiate better terms with suppliers. This will automatically enhance the business’s overall position and help drive better and more sustainable growth.
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