An at-a-glance guide to making smart use of your money.
It’s no secret that cash flow is important for SME success. However, it is just as imperative to know how to use the cash tied up in your business the right way.
For example, if you over compensate the amount of funds you commit to your working capital, you could be left trading in a negative cash cycle. What’s more, investing in the wrong areas of your business (especially if you’re a start up) is more likely to break you than make you.
To help, here’s our at-a-glance guide for what to do with the cash tied up in your business.
Pay director dividends
You, as the owner of the business, work hard and deserve the rewards. However, sometimes, even when your business is making money, cash flow can be poor due to slow paying customers. This makes it especially difficult to distribute your profits. Invoice finance can release cash tied up in your debtors to facilitate these distributions.
Meet payroll commitments on time
if not early The fact is, employees and contractors are the lifeblood of your business, so they must be paid on time. Keeping your staff (especially the good ones) can be tough, which means any competitive advantage is a bonus. If you can access your cash sooner, perhaps paying your payroll earlier, your staff will value your employment more.
Plan for growth
Planning for future growth such as hiring the right staff for your business, upping your marketing efforts and streamlining your operations is paramount for your success. Accessing the cash flow you need to do this is easy with invoice finance. What’s more, seeking expert advice on how to optimise your back office will ultimately free up more time and money to focus on future business development.
Build an investment portfolio
Cash tied up in the assets of your business might not be giving you a return. Meanwhile, waiting for debtors to pay is dead money – it’s virtually an interest free loan for your customers! By receiving that cash faster, whether by getting them to pay quicker or using invoice finance, you will free up cash flow to invest in other opportunities such as building an investment portfolio.
If you’re like most SME owners, you will know that growing organically can be a slow way to build a business. With access to greater cash flow, you will be armed with the capacity to consider acquisitions, which can help fast track your growth.