Cash optimization solutions for emerging businesses

Cash flow is often very tight when you’re running a new business. Even if you’ve been successful in raising funds for the areas you need to invest in, making sure that you have enough money for everything you need to do on a daily basis can be a challenge. The solutions discussed here will help you to do more with the money you have and to ensure that you don’t find yourself short at crucial moments.

Automate your payment management

When you’re working with restricted cash flow, it’s all the more important to make sure that you keep close track of the money that’s owed to you, sending reminder notices if payment is overdue. Automating this aspect of your business means you don’t have to rely on your memory or on manual record-keeping, which can be difficult when you have lots of different pieces of paperwork from various organizations of which to keep track. It doesn’t cost much to do and, by removing the potential for human error, it can significantly improve your results. If you still have problems getting your creditors to pay up reliably, you may want to try offering a discount for early payments.

Focus on communication

When you’re focused on finance, it can be easy to overlook the importance of how your business functions at a social level, but excellent communication is essential for keeping control of your cash. It’s easy for things to get out of balance when different people within an organization are spending money without informing each other about it, even if that spending is wholly legitimate. Simple delays in communication can mean that cash is suddenly unavailable when it’s needed. Having a single record of expenditure, which is updated automatically as soon as payments are made, can save you a great deal of trouble.By maintaining good relations across the business, people are more likely to come forward and let you know if they run into difficulties – for example, by miscalculating what they need to pay.

Improve cash distribution models

As you start to expand, managing the movement of cash between your different sites can become a problem. It is a particular issue for banks because they deal directly with money, and leading solutions to optimize cash distribution across bank branches include the new generation of cash machine software developed by Perativ. That means they can more easily predict how much cash will be needed in any given location at any given time, and it’s a model that other types of business can learn from. Transporting and distributing cash more efficiently means you don’t need as much in your system overall.

Refine inventory management

How much of your money is tied up in materials or stock that you won’t be able to process or shift for some time? While there are economies of scale available to those who buy in bulk, sometimes you need to prioritize having cash in the immediate term over making savings in the long run.Managing your inventory on a just-in-time basis presents challenges of its own. Still, most businesses find that these can be overcome by being well organized and having back-up suppliers to turn to if your main ones can’t accommodate your needs. It also gives you the advantage of needing less storage space, potentially reducing your overheads.

Sharpen up forecasting

To ensure that you won’t have to dip into your cash reserves to deal with unforeseen circumstances too often, you need to make sure that your forecasting is as good as it possibly can be. There are two main ways to do this: by collecting more data and by analyzing the data more effectively. Again, automation can be your friend here. However, you will need to develop your financial savvy or access professional financial expertise. That could be done through outsourcing if you can’t justify taking on a new staff member. The aim isto make sure that you’re asking the right questions when you look at your data. Also, that you’re keeping track of broader issues across the markets and that you can effectively anticipate problems that lie ahead.

Considering these solutions will help you to identify weaknesses in your business model and areas where you can afford to reduce your working capital, freeing it up for other purposes. Although it’s always an effort to implement change, doing so when your business is new will set you on a sound footing going forward and help you get through that difficult period before you have fully established your business.