Cash Management Process
The following advice is useful in helping you understand the cash management process and how to maintain maximum profitability.
- learn basic accounting and familiarize yourself with the computer programs used for accounting in your specific industry. This will help you understand your cash flow and know the services that can help improve it
- keep your business accounts separate from your personal accounts
- demand that your financial books are up-to-date and well managed
- hire a good accountant, especially if you have employees and need to prepare payrolls and deduct such typical employer contributions as income tax and social security deductions
- decide the accounting methods you will use to manage the business finances
- a good accountant can enhance your relationship with the financial institutions that manage or evaluate your account and financing, investors or any other banking services required as your company grows
- the accountant prepares the financial statements and cash flow statements needed to handle most of your banking transactions or to attract potential investors
- update your financial statements frequently
- stay current with the key percentages, indicators and financial numbers on your financial statements
- compare current and past statements
- accountants prepare three types of statements: certified, examined and combined, each one responds to different needs
- keep good financial control from the onset
- do not delegate the responsibility of signing checks or writing purchase orders
- apply cash flow control methods
- find out if your financial institution can offer you specific commercial services that facilitate cash flow control within your business
Expanding Your Business
Your company’s goal is to grow and expand. If you think this is the moment to grow, consider the following factors:
- When to expand?
- when your business is at top capacity
- when the business is financially strong enough to assume the cost of financing an expansion
- when you can assume calculated risks
- when demand for your products and services exceed your capacity
- when you have formulated a plan that allows you to cover the excess demand comfortably by undergoing a well-planned expansion
- Why expand?
- who are your clients? How can you serve them better?
- how is the competition working? What can you offer that they aren’t?
- why are you considering expanding now?
- do you need more physical space to carry out your business activities?
- do you need to expand your corporate fleet? Do you need to improve the technology or equipment you are using?
- do you need more employees?
- do you need to increase your production?
- do you need more capital?
- How to expand?
- review your business plan to accommodate your expansion plans
- include extensive details about why and how you want to expand the business
- decide what the expansion is going to cost
- determine by how much your revenues will grow if the proposed expansion becomes a reality
- determine if you need financing
- review your financial plan
- request financing
- consider a line of credit instead of a loan, this way you will only use the money you need
Selling Your Business
If it’s time to sell your business, consider the following issues that will help you achieve a profitable and successful sale.
- make sure that your decision to sell the company is firm and that all the involved parties at the company are in agreement
- request an official evaluation by an independent professional to determine what the business is worth
- establish why you want to sell, the buyer will want to know
- organize your finances and prepare audited financial statements for the company, possible buyers will request proof of the company’s revenues and income
- gather all the company’s legal documentation, including: contracts, insurance policies, accounts, list of providers, list of employees, etc.
- prepare a detailed inventory
- do not conceal business faults and/or weaknesses; give your buyer the opportunity to determine how to deal with them adequately
- set a reasonable selling price and terms for the business
- get legal advice
- think who the potential buyers of the business might be: competitors who want to expand their market share, independent buyers, investors, colleagues, employees, etc.
- project the future of the business in a positive light. It is easier to sell a business that generates profits and has good future prospects than one that is suffering economically
- if your business is not economically stable, ask yourself what you can do to increase its sales prospects
- learn more about the legal aspects of a sale, specifically if the business has incurred in long-term responsibilities debts and/or contracts that the buyer will inherit or will have to negotiate with you
- if there are business partners, it is advisable to clarify any differences and reach solid agreements on how to divide the profits of the sale
- determine how you will announce your intention to sell the business
- inspect your business
- if you can, make small repairs to increase the value and attractiveness of the business
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