Improve Company Liquidity
We all know that cash flow is the life blood of business. Healthy cash flow is essential to a healthy business. When times are tough, many companies start looking for ways to increase their available resources and improve liquidity. If you’ve visited the Online Finance Network blog before, you know that liquidity has come up in conversation before and that is your company’s ability to convert assets into cash to pay expenses.
There are several different ratios used to calculate liquidity, but the two used the most often are current and quick ratios. These ratios will help you make sure that your company has the proper cashflow needed in order to be successful.
If you are looking for ways to improve liquidity, there are several different places you can look.
- One place to look is your overhead. Look at your costs to see if there are places you can cut back. Whether it’s money spent on rent, supplies, utilities, insurance, or travel costs, all have an immediate impact on your company’s profitability.
- You should also take a look at your assets that aren’t being used. If you have extra equipment that’s not being used, look into selling or leasing it. Excess equipment can be turned into quick cash that can then be used to pay down debt.
- Other areas you should pay attention to are your accounts receivable and accounts payable. Make sure that your clients are being invoiced on time and more important they’re paying on time. Take a look at your accounts payable and try to negotiate payment plans with your vendors. Both of these are ways to improve your company’s liquidity.
- Take some time looking at your company’s profitability. How profitable are your products and services? Do prices need to be adjusted to match costs and the market overall?
- Bad debt and slow payers: As an extension to point 3 above, many businesses often aren’t aware of slow payers or the exact level of bad debt they are carrying until its too late. Depending on the size of your business, it could be more beneficial to outsource the collection of bad debts to a profession debt collection agency. Professional in their approach and no matter where you or your customers are located – hiring debt collectors melbourne, debt collectors sydney, debt collectors adelaide, debt collectors perth or debt collectors brisbane
Without a working capital, your business is in a lot of trouble, so take some time to look into these areas of your business to see if you can make adjustments to improve liquidity.