Article

9 Ways For Cash Flow Management

By Welch Capital Partners on
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May 26, 2021

MANAGING CASH FLOW WILL BE THE KEY TO ENSURE YOU CAN WEATHER THE STORM

It is clear, that the impact of Covid-19 will be felt by many businesses. As we write this article, we are only at the beginning, and the total impact remains to be seen. Therefore, before the situation worsens, let's get ahead of the game.

WHAT CAN YOU DO TO MANAGE YOUR CASH FLOW?

It's all about inflows and outflows of capital. Maximize inflows and reduce outflow. It seems simple enough, but when everyone is doing the same, your inflows are another's outflow.


HOW TO MAXIMIZING INFLOWS?

  • Accounts Receivable: It is important to focus on high margin sales, and keep up to date on your receivables. It is okay to start providing notice to your clients of upcoming or past due invoices. When markets are tight, many companies delay paying their invoices, however, the "squeaky wheel gets the grease".
  • Limit customer credit: If possible, request prepayment, deposits, or progress payments from your customers. Avoid approving credit to customers that you do not already have an existing relationship with.


HOW TO REDUCE OUTFLOWS?

  • Inventory Management: Examine your current inventory, and attempt to use what you already have on hand before ordering more. Evaluate product lines, and see if you can consolidate or eliminate low volume products.
  • Accounts Payable: You need employees to do the work, so pay them first. The tax man is never a good place to cut payments, so pay them next. Subsequently, anything that has been financed such as equipment leases, and bank loans should be next in line. Finally, pay suppliers who you will need services from in the future. Talk to your creditors and try to negotiate extended terms or make partial payments.


HOW DO I GET CASH FLOW INJECTION?

If you need an injection of capital, below are a few options.

  • Factoring: Consider selling your receivables to alternative financial providers.
  • Reverse Factoring: Unlike traditional factoring, where you sell your receivables, reverse factoring is a mechanism to pay suppliers early to get discounted rates or pricing.
  • Lines of Credit: Use or extend your lines of credit.
  • Assets: Consider selling assets that you are currently not using.
  • Strategic Equity: Consider bringing on a strategic capital partner who will not only provide a cash injection now but will also provide guidance and experience to recover quickly once life starts to get back to normal.


ABOUT WELCH CAPITAL PARTNERS  

Looking for financing to help you through this crisis? Welch Capital Partners offers strategic and practical advice to help ensure you get the right capital. Contact us at smay@welchgcapitalpartners.com

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