Too many companies wait until crisis occurs before they are to begin focusing on the improvement of financial management,. Often at that time, that it is too late. In order to evaluate and set time aside for now the strengths and weaknesses, and company financial management activities and systems can save more time and worse. It also can increase your profits, it is at the end of the day all is.
To build value for your company and build a strong financial foundation to help five strategies to start are as follows.
1. Set the financial management system.
First, to start the integrity of the processes and procedures is a control system. Control systems to prevent and detect errors in daily activities. For example, there is a standard way for handling inventory, receivables, liabilities? It is, probably not if you follow the guidelines of the standard control system.
2. Daily account access information.
Your account information, make sure that you can access every day. To effectively manage your cash it is invaluable. There is no reason that provide Internet access at a reasonable cost to most banks account information instantly you are accessing.
3. Manage the cash component.
Concentrations for three major components of cash management: accounts receivable, accounts payable, and inventory.
Let's look at each component.
Accounts payable the.
Check whether or not the credit and collection systems work efficiently. Must be receivable, excess investment cash flow deficit to avoid borrowing more money In other words, you must carry carrying extra loans probably carrying excessive debt and debt interest payments of extra direct cost. Internal equity loans to finance even indirect cost yet; acquisition include cash, debt reduction, or interest inventory to increase sales, so that the opportunity cost of using balance whose shares elsewhere.
Defines the relation to the accounts receivable collection period cash flow processes. Period before you can calculate monthly should be your collection compares those results to industry averages and related. You should investigate any material differences.
Credit policy will affect cash flow and earnings. Can increase long terms sales and earnings, but any decision in accounts receivable to provide conditions more generous estimates the large investment costs and higher sales of bottom-line benefits and tradeoffs involved requires. You can increase the cost of your bad credit: forget deserves credit for your credit card terms lead to an increase. You can however use price increase to offset the more generous terms.
Please consider following when you develop a accounts receivable policy.
Make sure to provide a credit to your financial situation before. Consider first order cash. Invoice terms are too generous. Charge the customer interest payments. Give a discount for early payment. If you are offering discounts on conditions to encourage customer discount attractive must be. You can also provide early warning signals as; take discounts to customers or even more before you extend credit may be signs of financial trouble might suddenly stop, and to investigate the discount on your. Don't wait before taking action over arrears of 30 days; you must minimize the exposure of your bad credit company. If you put $ 1,000 of bad loan disposal and 10% profit in dollar terms, just add $ 10,000 to make it in sales.
Inventory
Than to run first, such as warehousing and insurance costs to carry accounts receivable inventory to run expensive is aware. Reducing the cost of transportation, because investment in inventory reduction greater bottom line receivable in more than benefits.
Your creditors is important to complete the analysis, average stock held monthly. Compares to the previous month's industry average and investigate any material difference or change.
Are the basic requirements for a regular stock. You should investigate the excess inventory of all items.
Sales forecasting is important without it, for inventory management, management required out of.
For stock investments, regular investment core sales and internal safety stock and equal and plus (for example, if the sort is delayed some extra stock hand to) increasingly expects growth in sales, some amount.
In this expression, you can verify the economic order quantity: sqrt (SO 2 CP)
It = SQRT square root
S forecast annual sales =
Fixed cost per-order = O
C % of the purchase price of the annual inventory ='s
P = product's purchase price
Note that attempts to minimize the cost of inventory in the need to order the stock answer question of how the above equations, and how often. It is not perfect; assumes no expression account quantity discounts, and demand to be constant. Tools are available for your decision to create a process.
10 Questions that follows the inventory process that you can use to determine.
Sales forecast? Compare actual sales forecasts, or predictions of the next adjustment. Do you know which items account is 80% of your sales? You must closely manage these items. You can get fast stock? How to order inventory? How much inventory to order? To save a few extra cents you extra? Do you know your stock costs? Depends on one or two suppliers? By analyzing how often inventory obsolescence and configuration to determine. Policy decisions have old stock, how to get rid of it? To provide tracking information system, inventory?
Accounts payable the.
If is to stretch your debt as much as possible to provide attractive discounts to many of your buyers to sufficiently attractive, is also many supplier discounts available.
-Weekly – such as, check whether the payment system tracks your debt on a regular basis to proceed smoothly.
Similarly inventories and receivables, accounts payable monthly analysis completes the previous period and compares to industry averages. You should investigate any material differences and changes.
Need to stretch your debt situation is if you have confirm whether or not to understand your company's vendors. The need to deal with the situation if there are unexpected spikes on your debt plan.
Periodic re-evaluation of the vendor to find out whether you are getting the best value for your needs.
4. Budget
Should you need to plan for growth and fundamentally, foresee problems. You must prepare the budget. Will need to complete the sales budget in addition to the disaster situation, cut in half your sales budget to complete. Advantage is very straight forward is. It forces to keep the company running in this situation, you can ask yourself. The may be able to save you money too soon, free cash flow to point to the field. A kind of disaster plan; just is much easier to focus on the crisis in hand need to act on it fails, and if you do not have.
5. Develop a strong relationship with your bank.
Direct attention to building relationships with your bank. Always they where your company stands keep. Hit a difficult patch is much easier to get on board to understand your business and your bank. Fall into trouble and directly contrary to opinion, Bank necessarily jump ship without please. They are willing to work with small businesses by hard times, and so their trust to get more you and your company more easily they trust. Their transparency in your transactions and to do so, provide timely financial information.
Your bank with cash management as a resource. Arrangements can be put in place to increase interest in your cash flow products are available that can increase or returns. However, you must check if it's still cost-effective.
