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* How much of my profit should I put back into my business?
Basically, the profit that you get from your business is considered to be your savings and may be used to fund other things such as loans and mortgages. However, in cases where you plan to expand your business, you can utilize the profit that you have earned.
As to how much profit you will allot to your business, it will depend on the expansion you have planned. Things such as additional equipment (particularly in a production-type business) and personnel should be taken into consideration. After you have determined these things, you can now calculate the total cost you will incur from such expansion. You can now decide on the percentage of the profit that will go back to your business.
* My business is experiencing fast growth. How can I make sure my cash flow can sustain that growth?
There are basic rules for making sure your cash flow can sustain the growth of your business. These are discussed in the following:
1. Make sure your cash flow is updated with changes that happen in your business. Since your business is expanding, it is imperative that you have a good grasp of your cash inflow and outflow.
2. Always watch your cash balance. Do not neglect this. Although your business is growing, there will be instances when you need additional capital to finance your expenditures. Remember that your cash balance is part of your cash outflow.
3. Determine if your cash inflow, whatever your time table may be, is enough to sustain your growing business.
4. Use a professional such as an accoutant to help you with your cash flow. Although an expense, his or her expertise can be invaluable and save you money in the end.
* What are some ways I can improve my business cash flow?
It is important that you consider your business' cash flow. Remember that the progress of your business is dependent upon how well you manage your cash inflow and cash outflow. Here are some ideas for you to improve your cash flow.
1. Create an automated system that will bill your projects on a regular basis. It is very easy to fall behind if you do not automate this task. As the owner of your business, you are so busy building your business and making deadlines that you may not get around to billing. You may put it off. It can cause penalties for due payments. If you are taking a long-term project, it is best that you discuss in advance regular payments rather than one lump sum due at completion of a contract.
2. You should consider offering your clients a discount for quick payments. Giving incentives is one strategy that is relatively effective in improving your business’ cash flow.
3. If you want to avoid cash flow problems, having fast-paying clients is your ultimate goal. Check the credit references of your clients. Contact the businesses these individuals have dealt with in the past.
4. In case you are still financing your business from capital you have borrowed, it is often best to consider consolidating your loans. Debt consolidation can give you lower-interest payments that will help you avoid cramming on monthly obligations with your suppliers and staff.
* How can I use factoring to improve my cash flow?
Factoring is a form of loan which advances money to a company as it issues new invoices. It is quite helpful in improving your cash flow because you can borrow a certain amount that grows with your sales. It enables you to fund possible expansions of your business since you need to pay your suppliers before you receive payments from your clients.
In addition, there are no assets that will be charged against you to secure the funding. You will be able to maximize available funds that you have, thus helping you improve your business’ cash flow.
Charly Applegate is a regular contributor to cash flow and fuding-related resources such as Cash Flow Index. Website: www.CashFlowIndex.com |
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