What are the best ways to obtain liquid cash for my growing company?
Companies on the move need to find ways to receive liquid cash fast in order to keep growing. Here we define the best ways to obtain liquid cash for your growing company and explain why trucking factoring is the best option for related growing companies.
Use Sweep Accounts
Liquidity makes it possible for your company to pay its dues on time. Improving your company’s liquidity requires that businesses look into strategic ways to gain funding quickly without overburdening themselves with investment returns they cannot afford. A great way to overcome this hurdle is to integrate sweep accounts. Sweeping is the process of transferring funds into accounts that are interest-bearing. This way, when funds aren’t needed, you can sweep them into your operating accounts for later when these funds are required. The purpose of a sweep account is to give you a way to earn interest when cash balances are at an excess.
Opportunities to Reduce
Overhead expenses are vast and can include things like advertising, professional fees, rent, and labor. These indirect expenses often cause businesses to spend more than is necessary. Find ways to cut back on your overhead costs and accumulate more cash for your company as a result. This is no different than finding ways to save money as an individual. The idea of cutting back on unnecessary expenses is fundamental to anyone saving money. The only difference is instead of cutting back on things like gym memberships and channel subscriptions, you’re cutting back on business purchases that may not be crucial to the business’s success and maintenance.
Trucking Factoring Company: A Top Option
The best way to obtain liquid cash for your growing company is to rely on trucking factoring to give you the funds you need to secure payments to drivers. You’ll also be able to map projections for delivery in the long-haul. If you are a growing company, chances are you do not have the cash available to pay workers and handle the additional costs to manage your trucking business. Trucking factoring company is an excellent option as it typically does not discourage businesses that are just starting out from gaining the funding they need. Many providers can assist you with 24-hour invoice payouts once you are approved. The approval process is typically much more straightforward than one might think, and poor credit is generally considered an irrelevant factor towards approval. Rather than waiting months for a bank’s approval, receive yours in 2-5 business days with trucking factoring providers.
Consider Accounts Receivable
Be active in your management of receiving your funding from factoring partners. In doing so, you will ensure that you can pay your employees and bill your clients on time. You will avoid additional interest or appeasement costs if you are on top of the funds coming in and how they are being distributed. Delays that are avoidable on your end are your responsibility to look out for. If your lender or factoring provider is not able to come up with the cash flow you need quickly enough, you should be considering your other options to speed up the process and grow your company and its liquidity.
Manage Accounts Payable
Speak with your vendors on how you can negotiate better payment terms to allow you to keep your money for a more extended period of time. The additional time you have to come up with the cash will give you the ability to pay back your purchases interest-free. You will generate a greater cash flow as a result and conserve your money by giving yourself enough time to pay back your vendors adequately.
Review your Profitability
They need to adjust your prices will occur as markets change. Be sure to review the profitability associated with your products and services consistently. Consider where prices should move and when they need to be increased in order to make as much as possible. It is your responsibility to manage profitability, so making a regular commitment to this process will consistently add to your business’s liquidity. If you are selling any artisan goods, consider reaching out to the designers who may feel that their items’ price ticket could be increased. Placing more value on artisan or handmade items will benefit your return as well.
Monitor Owner Draws
The amount of money that is being taken out can cause your business to suffer unneeded cash strain. Taking active measures to constantly monitor how much money is being taken out for non-business needs, including owner draws, will significantly influence the amount of liquidity maintained for the business. If you are not keeping track of how much money is going out at a time, you are causing a significant cash drain that will continue and potentially lead to debt if you do not manage your draws effectively.
Get Rid of Clutter
If you have cluttering unproductive assets, take time getting rid of these items and reduce the need to store unnecessary things. The purpose of spending money on assets is to gain revenue. If these assets are not serving you, then it’s time to ditch them for good. You are only spending more money on equipment and units that you do not need, and you are letting potential sales money sit, thereby not attending to your unproductive assets. This practice is no different than a landlord choosing to sell their building due to a lack of renter interest. The investment is doing you no good if you are not generating cash on a regular basis.
Use Smart Finance Ratios
A good rule of thumb is to integrate finance ratios that will allow you to keep track of your company’s liquidity more deliberately. Generally speaking, there are two main ratios that businesses count on in order to get a feel for the company’s liquidity: current ratio and quick ratio. The current ratio represents the business’s existing assets when they are divided by the company’s current liabilities. If your target ratio comes out as 2 to 3, you know that you have substantial liquid funds to address your obligations. Quick ratio equates to the business’s current assets with less inventory that is then divided by current liabilities. If the ratio is 1 to 2, you know what your liquid funds are without selling inventory. These are quantitative approaches to managing your finances so that you can anchor key results into your liquidity. We recommend relying on numerical measurements to track your liquidity, given that seeing the numbers themselves will give you all that you need to know about where you are financially and where you want to be.
Talk to your Accountant
For further guidance, speak with your accountant about the balances that relate to your current assets and your current liabilities based on your balance sheet. By taking the time to look at your industry data more carefully, you can find loopholes that will help you accumulate more cash to contribute to your company’s overall liquidity. Your accountant will have an eye for this kind of detail and will be able to point out where you might consider selling or cutting back on draws. The assistance will give you greater insight into the changes you need to make to gain more cash. If your accountant is not able to provide you with options for enhanced liquidity, you should consider hiring someone else with more experience. Financial advisors and accountants are skilled in helping businesses and individuals find ways to manage their cash reserves effectively. If your accountant is unable to find places where you can make these changes, then increasing your liquidity starts with finding a more competent accountant to do the job for you.
The Bottom Line
Finding the right tools to manage the liquidity of your business takes strategic input from financial advisors. You may not be readily aware of the ways to navigate your current positions surrounding accounts; therefore, utilizing the help of a professional will get you much farther along in this process than going about it alone. Use these fundamental options to grow your company’s liquidity and get ahead of your competitors. By making just a few changes to how your business manages its accounts, you should see a great return. The most important thing is to stay actively involved in the management of your accounts, draws, and assets so that you can be sure of exactly how much money is going out and how much money is coming in. These conditions impact your business’s liquidity directly, suggesting that the more on top of these factors that you stay, the better your liquidity will be in the long run. Take pride in your business by managing it effectively and using your resources strategically. Cut back on the assets that are not serving you and speak with vendors and lenders who can help you find smarter financial solutions. If you stay active in your attempts to improve liquidity, your growing company will only thank you.
