Tips for improving your cash reserve

One of the most important things that any business owner should have is a cash reserve. Having a cash reserve can often mean the difference between surviving a financial crisis and going under. The reality is that having a cash reserve is your best defense in helping your business get through tough economic times. It is also important to understand that having a cash reserve is not enough. You need to be able to know how to best manage and maintain your money in order for it be effective. The good news is that there is lots of information to help you do just that.Here are some tips for improving your cash reserve-

- Be the expert when it comes to the finances of your business-Too often business owners in the stress of running their business will turn the financial management of it over to someone else and then never check on them. This can be a serious mistake. You need to always have a clear idea of what is going on with your business when it comes to the financial side. You should never allow anyone else to simply update you about your business finances.Having firsthand knowledge of your business finances is the best way to begin establishing, maintaining, and managing your cash reserve. In addition, when you are carefully managing your business finances, you will know how much accounts receivable that you have and what state it is in. Since this is a crucial part of having a cash reserve this is important.
- Control spending on every level-It becomes almost impossible to have a cash reserve if all of your money is constantly going out. You need to be able to keep that money within your business. The first step in doing this is to look at spending on every level of your business. Keep in mind that if you are spending money on something that does not add to the profitability of your company then it should go. In addition, it is important to understand that cutting spending also means getting the best deal that you can from vendors, lenders, and anyone else that you regularly do business with. However, cutting spending does comes with a note of caution. If you fail to cut enough your business could end up in serious financial trouble due to overspending but if you cut to deeply it could fatally injury your business. Cutting costs is best done with precision.The bottom line is that if you are spending less the chances are a lot higher that you will be able to generate a cash reserve.
- Don't let your money sit-Often times business owners could easily have a cash reserve but their money is sitting within the business and not working for them. One of the most common cases of this happening is when too much money is tied up in inventory. If you have inventory that is sitting in the warehouse or on the shelves that you money that is tied up and not able to work for you as a cash reserve. Careful inventory management can go a long way toward helping to establish a cash reserve. In addition, if your business regularly carries a large number of accounts that should be collected on, once again your money is sitting and doing nothing for you. Working on collections can allow you to get paid and free up money that can become part of a cash reserve. All it may take is assigning an employee to work on collections. The bottom line is that having an effective collections policy can be integral toward setting up a cash reserve.