How to free up assets and improve your business finances
Sometimes when business owners are looking to better manage their business finances they need to consider freeing up certain assets and generating some cash flow. It is important to note that there are many different ways that you can do this. Every business owners will need to determine what will work best for his or her company. It is important to understand however, that this can be a tricky process. If the correct assets are freed up then it can improve the financial standing of the business, however, if it is done the wrong way it can cause irreparable harm to the business. This makes it crucial that every business owner should learn all they can about this process before they proceed. Here is what you need to know about how to free up assets and improve your business finances-
- Start by considering fixed assets-If you are considering freeing up assets the first place to look is with your fixed assets. This can include: machinery or other equipment that you use in your business process. You may be able to generate better cash flow by leasing or subcontracting part of the process to another business. This frees up the cash that you would have spent on the machinery to use other places in the finances of your business. In addition, you may want to consider renting equipment that is only used occasionally or leasing instead of buying vehicles.
- Look at reducing your inventory-Another place that you can free up assets is with your inventory. Generally most businesses have too much inventory. Keep in mind that when you are carrying to much inventory you are not only tying up money with the inventory but you are having to pay the cost of warehousing and transporting it, as well. It is important that you determine the proper balance of inventory that your business needs to carry. You want to have enough inventory that you reduce the chance of stock outs but you don't want to have your cash flow unnecessarily tied up in your inventory. You will need to take the time and make the effort to carefully plan the management of your inventory so it is a positive influence on your business finances.
- Take control of accounts receivable-You can also free up substantial cash and assets through taking control of your accounts receivables. Your billing function should be as efficient as possible. You want to have your billing streamlined and your customers paying on time and in full. If you are not doing this you are losing cash that is tied up in waiting for your customers to pay. You will need to have a process in place that makes sure that all orders are immediately billed. In addition, you should only grant credit to customers that you are sure will pay their bill on time. Keep in mind that accounts receivables is just cash that you can't access. If you have a large enough number of accounts receivables your business finances will begin to suffer.
- Restructure credit management-Many business owners feel that in order to stay in business they have to offer credit to all of their customers. This is not true. Your first time customers will not be expecting to be granted credit. You should make sure that any customer that you are considering granting credit to is an on time payer before you do so.In addition, you should do a thorough background check before extending credit to any customer. When you do not allow your cash to become tied up in waiting for customers to pay, you will automatically improve your business finances.