Business and Finance

Cash Flow Management Issues Relating To Funding And Investment In A Credit Crunch

There is a fundamental difference between cash flow and net profit. Net profit is the bottom line of the profit and loss account measuring the net growth in financial value. Cash is the business liquidity and closely related to the changes in the value of the current business assets in the balance sheet representing the amount of money the business has at its disposal to generate further business.

Stock control management

The objective is to reduce the level of stock which uses working capital within the business.

Stock control is a major potential area where every business can become more efficient in its cash requirements. Stock comprises of four main elements, raw materials, work in progress, finished goods and consumable stores.. Each area can be managed to reduce the working capital requirement with an appropriate stock management system being adopted.

Raw material stocks can be reduced by setting a just in time stock control policy, negotiating better delivery schedules and reviewing order quantities with a view to reducing the value of stock held before it is required for production or sales.

Work in Progress is mainly a manufacturing area and governed by the manufacturing process however a review of the policies can produce efficiencies if excess products are left lying around waiting to be finished or excess materials are on the shop floor waiting to be used.

Standard levels of finished stock should be set to satisfy the requirement to supply all customers on time but avoid excess stock. Delivery schedules might be reviewed to ensure delivery times can be shortened to reduce the requirement for higher stock levels. Ideally the stock should come in one door and be invoiced out the other door the same day.

In some businesses consumable stores may be significant and where any significant working capital investment is required the policy should be reviewed to save cash by introducing stock control measures.

Profit margin management

The objective is to sell more cash flow friendly products.

Given a range of products within a business the gross profit and stock requirements and funding requirements may be variable. During a credit crunch the products offering the highest gross profit, fastest turn round and most economic use of working capital would offer the best options to reduce the credit crunch effect.

A sound management policy would be to review all products in terms of the working capital requirements and levels of gross profit margins with a view to concentrating sales growth in these product areas.

Financial investment management

The objective is to reduce the draining effect of capital investment in the business to protect the working capital requirements.

There are many cash flow issues in this area but consideration may be given to how fixed asset purchases are financed. In days of the credit crunch it may be safer to lease or buy major items on hire purchase than to buy outright. Different and alternate methods of financing investments can broaden the funding options open to a business and reduce the strain on working capital.

Consideration might be given to delaying the purchase of non essential renewable assets. For example the business may have a policy to replace the delivery vehicle or representatives car every three years. Delaying the replacement by six months saves valuable cash resources and protects the cash flow. Read the rest of this entry »

Small Business Merchants Account Advice and Tips

A small business merchant account is essentially a merchant account designed for the smaller business or individual trading online. Traditionally, it can be difficult for small businesses with limited trading history to get a merchant account. This is really a door opener for bigger and better merchant account facilities. Once you have a good record, the benefits can be really stunning.

The advantages of a small business merchant account is that it will enables you and your business to accept credit cards from customers. This will mean your customers will be able to order much easier than just relying on cash.

Small business merchant account processing gives your customers the flexibility to pay for items with a credit card or debit card. With a small business merchant account you can accept credit cards in person, on the phone, or via online. All businesses should consider accepting credit cards from clients, if they aren’t already.

A quality small business merchant account will accept all types of credit cards such as VISA, American Express, Mastercard and Discover cards. Thus increasing your sales potential, and you will have more customer marketing penetration.

After ironing out any initial teeThing problems your business will receive the money from the transactions with your customers, in your business account within two-three business days. Money earned that day can be sent to your business checking account, thus giving you great cash flow and will be a help with any small business debt solutions, which is a major challenge with businesses these days. you will receive a monthly statements at the end of month, this enables you to track sales turnover, cashflow and deposits into your business account much easier.

The credit card machine terminals or software for processing payments can be purchased, leased, there are also lease to buy options available.

With a small business merchant account you can also open up future lending capital opportunities for your small business that would require no specific loan applications or credit scoring applications.. Factoring is another option but let the business participating in factoring be aware! This is where you can obtain advances based on your credit card receipts from month to month, over say the duration of a years trading. This enables your business to have access to fast cash that can be used for pressing needs. Read the rest of this entry »