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Your company's cash flow is in trouble. What can you do to turn things around?

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Cash flow is the lifeblood of any business. It measures how much money you have coming in and going out of your company, and how well you can meet your financial obligations. If your cash flow is in trouble, you may face serious problems such as late payments, defaulting on loans, or even bankruptcy. How can you turn things around and improve your cash flow situation? Here are some tips to help you manage your cash flow better and avoid a crisis.

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1 Assess your cash flow

The first step to fixing your cash flow problem is to understand the root causes and the extent of the damage. You need to analyze your cash flow statement, which shows your cash inflows and outflows from operating, investing, and financing activities. You also need to calculate your cash flow ratios, such as the cash flow margin, the operating cash flow ratio, and the free cash flow ratio. These ratios indicate how much cash you generate from your sales, how well you cover your current liabilities, and how much cash you have left after paying for your capital expenditures. By assessing your cash flow, you can identify the gaps, the trends, and the opportunities for improvement.

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Mohamed Idris , CMSA , FTIP , FPWM
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Thoroughly analyzing your cash flow statements and ratios will allow you to completely appreciate the problems and prospects. By identifying problem areas and potential solutions it prepares the way for a turnaround and gets to the heart of the matter with cash flow.

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Pratik Asnani

Finance Manager | Driving Sustainable Long-Term Stakeholder Value through Financial Discipline | PMP?
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Few additional viewpoints to consider when facing cash flow challenges: - Negotiate with suppliers and work out for extended payment terms/discounts to ease the strain on your cash flow - Explore alternative financing options such as invoice financing. These can provide quick access to cash. - Conduct a pricing review to ensure it reflects the value you provide while remaining competitive in the market. - Stay agile and adaptable to market shifts and unexpected challenges. Keep a close eye on industry trends, customer preferences, and economic indicators, and be prepared to pivot your strategy as needed to protect your cash flow and maintain financial stability. Remember, resilience and flexibility are key traits of successful businesses

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2 Cut your expenses

One of the most obvious ways to improve your cash flow is to reduce your expenses. You can start by reviewing your budget and identifying the areas where you can save money without compromising your quality or customer satisfaction. For example, you can negotiate better deals with your suppliers, switch to more efficient equipment, outsource some tasks, or eliminate unnecessary overheads. You can also prioritize your spending and focus on the essential items that generate revenue or add value to your business.

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Mohamed Idris , CMSA , FTIP , FPWM
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Cutting costs might be the simplest way to increase cash flow. Your business could benefit financially from spending analysis and optimization, strong contract negotiations, and the prioritization of essential expenses.

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3 Boost your income

Another way to improve your cash flow is to increase your income. You can do this by implementing various strategies to attract more customers, sell more products or services, or charge higher prices. For example, you can offer discounts, incentives, or bundles to encourage repeat purchases, referrals, or upsells. You can also diversify your revenue streams by creating new products or services, expanding to new markets, or partnering with other businesses. You can also raise your prices gradually and strategically, taking into account your costs, your value proposition, and your competitors.

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Mohamed Idris , CMSA , FTIP , FPWM
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Raising revenue is a preventative measure that may enhance financial flow. In order to build a stronger financial foundation and increase revenue your firm should focus on increasing client acquisition boosting recurring business and diversifying revenue sources. It adds to an all encompassing turnaround strategy and goes hand in hand with cost cutting initiatives.

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4 Manage your receivables

A common cause of cash flow problems is having too many unpaid invoices or slow-paying customers. To avoid this, you need to manage your receivables effectively and ensure that you collect your payments on time and in full. You can do this by setting clear payment terms and policies, sending invoices promptly and accurately, following up regularly and politely, and offering multiple payment options. You can also incentivize early or upfront payments by offering discounts, rewards, or benefits. Alternatively, you can factor or sell your receivables to a third party for a fee, which can give you immediate cash but reduce your profit margin.

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Brian White - Accounts Receivable Specialist

Collections | Account Receivables | Business Consulting | Medical Consulting | Dental Consulting | Process Improvement | Business Development | Sales | Sales Management | Training | Cash Flow Management
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A way to get more cash flow is to collect the cash that you are already owed. Consider using a third party to pursue your past due receivables. Update your in house process to collect more money faster. Stop doing more work with people/companies who have overdue balances

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Mohamed Idris , CMSA , FTIP , FPWM
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Improving cash flow may be achieved by efficiently managing receivables. Establishing transparent payment terms, delivering bills on time, and providing incentives for prompt payment are all ways to guarantee a steady flow of funds. While other options, like as factoring or selling receivables may provide temporary relief they do come with their share of expenses.

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Andi H N Wijaya

General Manager
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In my experience, this point what I did it, by change payment term, negotiate it also follow up to collect on time and in full

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5 Optimize your inventory

If you have a business that involves inventory, you need to optimize your inventory levels and avoid having too much or too little stock. Having too much inventory can tie up your cash and increase your storage, maintenance, and obsolescence costs. Having too little inventory can lead to lost sales, dissatisfied customers, and damaged reputation. To optimize your inventory, you need to forecast your demand, track your inventory turnover, and adjust your ordering frequency and quantity. You can also use inventory management software, tools, or techniques to automate and streamline your inventory processes.

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Mohamed Idris , CMSA , FTIP , FPWM
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Optimal inventory management is a cornerstone of effective cash flow management. With the help of inventory management tools, accurate demand forecasts, and close attention to turnover businesses may maybe strike a balance between having too much and too little product on hand. This will assist them in avoiding wasteful spending while ensuring client satisfaction. Cash flow may be improved with optimizations like these.

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6 Seek external funding

If none of the above tips are enough to solve your cash flow problem, you may need to seek external funding to bridge the gap and keep your business afloat. You can do this by applying for a loan, a line of credit, or a grant from a bank, a lender, or a government agency. You can also look for investors, partners, or donors who are willing to provide you with equity, debt, or donations in exchange for a stake, a return, or a recognition in your business. However, before you seek external funding, you need to weigh the pros and cons, the costs and benefits, and the risks and rewards of each option, and choose the one that best suits your needs and goals.

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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?

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Anurag Guglani

Sr. VP Accounts
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The things which can improve the cash flow are monitoring and managing the AR/ AP and inventory levels. Close monitoring and controlling the DPO/ DSO and DHO will help in managing the cash flows.

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Your company's cash flow is in trouble. What can you do to turn things around?

1

2

3

4

5

6

7

1 Assess your cash flow

2 Cut your expenses

3 Boost your income

4 Manage your receivables

5 Optimize your inventory

6 Seek external funding

7 Here’s what else to consider

Budgeting & Forecasting

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Your company's cash flow is in trouble. What can you do to turn things around?

1

2

3

4

5

6

7

1 Assess your cash flow

2 Cut your expenses

3 Boost your income

4 Manage your receivables

5 Optimize your inventory

6 Seek external funding

7 Here’s what else to consider

Budgeting & Forecasting

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