How can aviation businesses optimize cash flow?

1 Reduce expenses

One of the most obvious ways to optimize cash flow is to reduce expenses, especially those that are not essential for the core operations of the business. For example, aviation businesses can negotiate better terms with suppliers, vendors, and creditors, or switch to more efficient and cost-effective alternatives. They can also review their inventory, maintenance, and staffing levels, and eliminate any waste or excess. Reducing expenses can improve the cash flow margin, which is the difference between the cash inflow and outflow per unit of sales.

2 Increase revenue

Another way to optimize cash flow is to increase revenue, either by expanding the customer base, raising the prices, or offering more value-added services. For example, aviation businesses can diversify their revenue streams by tapping into new markets, segments, or niches, or by creating partnerships or alliances with other businesses. They can also increase their customer loyalty and retention by providing superior service, quality, and safety. Increasing revenue can improve the cash flow turnover, which is the ratio of sales to the average cash balance.

3 Forecast and monitor

A third way to optimize cash flow is to forecast and monitor the expected and actual cash flows, and adjust accordingly. For example, aviation businesses can use historical data, market trends, and scenario analysis to project their cash inflows and outflows for different periods, such as monthly, quarterly, or annually. They can also use various tools and indicators, such as cash flow statements, budgets, and ratios, to track and measure their cash flow performance and identify any gaps or risks. Forecasting and monitoring can improve the cash flow management, which is the ability to plan, control, and optimize the cash flows.

4 Leverage financing

A fourth way to optimize cash flow is to leverage financing options, such as loans, leases, or equity, to access additional funds or lower the cost of capital. For example, aviation businesses can use debt financing to borrow money from lenders, such as banks or investors, and repay it with interest over time. They can also use lease financing to rent assets, such as aircraft or equipment, from lessors, and pay a fixed or variable fee over the lease term. Alternatively, they can use equity financing to sell shares of their business to shareholders, and share the profits or losses with them. Leveraging financing can improve the cash flow availability, which is the amount of cash that can be used for various purposes.

5 Optimize taxes

A fifth way to optimize cash flow is to optimize taxes, such as income tax, sales tax, or property tax, and minimize the tax burden or liability. For example, aviation businesses can use tax planning strategies, such as deferring income, accelerating expenses, or claiming deductions or credits, to reduce their taxable income or increase their tax savings. They can also use tax compliance practices, such as filing returns, paying dues, or resolving disputes, to avoid penalties, interest, or audits. Optimizing taxes can improve the cash flow efficiency, which is the ratio of net income to cash flow from operations.

6 Automate and integrate

A sixth way to optimize cash flow is to automate and integrate the processes and systems that affect the cash flow cycle, such as invoicing, billing, collecting, paying, reporting, or analyzing. For example, aviation businesses can use software, apps, or platforms that can automate the tasks, workflows, or functions that are repetitive, manual, or error-prone, and save time, money, and resources. They can also use solutions that can integrate the data, information, or insights that are scattered, isolated, or inconsistent, and improve accuracy, visibility, and decision-making. Automating and integrating can improve the cash flow agility, which is the speed and flexibility of responding to changes or opportunities.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?