Nathalie Slight | Journalist
Money is at the centre of any business operation. So how can you juggle your cashflows in and out responsibly so your business keeps growing?
We asked Pierre Trudel, an account manager at Desjardins Business--Saint-Hyacinthe, for some tips that will help business owners find the flexibility they need.
1. Maintain a cash budget
It's no secret that good cashflow management starts with a plan! Be precise when you're managing cashflows so you can maximize liquidity and see what's down the road.
"Make a weekly and a monthly budget so you know exactly how much money is coming in to the company and leaving in the short and the medium term. It might sound obvious, but it's really the foundation for everything else. You can't build a solid business on a shaky foundation," says Trudel.
2. Keep an eye on payments and accounts receivable
"Remember," says Trudel, "the faster you get paid, the more you can put your cash to work!" There can be a lot of stagnant money in accounts receivable and many businesses underestimate how they can use it. Keep a close eye on billing, payments and the deposits coming in so you know where you stand.
3. Negotiate terms and conditions with suppliers
Your suppliers are just as important as your clients. Develop a strong working relationship with them and you'll be able to work in a little financial flexibility, particularly when it comes to payment conditions. Having 30 days to pay what you owe can free up a lot of cash you can use for your operations. It doesn't cost you anything, as long as you don't overextend yourself!
4. Find the right financing fit
Keep this in mind: match up short-term financing with short-term assets and long-term financing with long-term assets. A line of credit is short-term financing for regular, ongoing operating costs. Don't use it to pay for equipment or property. For some purchases, like machinery, the best financing solution depends on the expected lifespan of what you're buying.
"Find the right financing for the right term, protect your working capital and look for ways to improve your cashflow management," says Trudel.
5. Talk to your advisor regularly
"When it comes to managing cashflows, the trick is to not let your money 'sleep,' but to run it through the business quickly, create returns and reinvest it; thrive, find a new niche in the market and grow your business!," concludes Trudel. Your account manager is your best source of advice and expertise to find solutions for your business.
Read our tip sheets:
You might also like: