Five Timeless Tips for Managing Cash Flow and Risk

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There are certain fundamental functions that businesses must perform to survive. These functions are timeless and applicable no matter what the economic landscape is.  Managing cash flow and risk is one of those functions.  Robyn Gault, Direct Capital’s Director of Strategic Accounts, wrote about 5 tips for managing cash flow and risk back in 2006. This post is based on that article and as you’ll read, these tips are still applicable today.

Match Revenues to Expenses

The ability to match revenues to expenses is a major key to long-term profitability and success. As the recession has increased the competitive landscape, it has become more difficult for all of us to find customers.  Whether you are planning for an equipment upgrade, new store/facility, or re-model, proper funding is a key component to making the project happen.

Explore your options

It is important for businesses to explore the options available and to see what program is best for their specific situation. Lease financing can be a strategic way to conserve capital and reduce risk. Many businesses continue to rely heavily on this financing vehicle to help mitigate the risk of large scale growth and equipment upgrade projects. Business owners also have access to other tools such as business loans, business cash advances and lines of credit.  Each tool has its advantages and it’s important to match your goals with the tools.  Below are five tips to help better match your business goals with the financing tools available to you.

5 Quick Tips to Managing Cash Flow & Risk:

  1. Invest cash in assets that appreciate, finance assets that depreciate. Know which investments will yield you profit, and finance those purchases. This will help you match revenue to expenses month over month, allowing you to gain tighter control over your profit.
  2. The more you finance, the more tax dollars you may save. Through IRS Section 179 you can lower your cost of acquiring equipment through increased expense limits on purchases of $250,000 with 50% bonus depreciation above that level for qualifying purchases in 2009.
  3. Finance now and lock in low fixed payments. The Prime and Federal Funds rate are at historically low levels, however, given the failure of so many banks there is a lot of uncertainty in the credit markets. Mitigate the risk and uncertainty by locking in fixed monthly payments.
  4. Accurately budget future expenses and profits generated by the purchase. Don’t tie up your cash. Keep some cash liquid for immediate use in the event of an emergency.
  5. Choose a finance partner with the ability to meet all your needs. Whether you are a business looking to expand, a franchisee planning an upgrade or a vendor in need of financing for your customers, structuring the right program for your situation can seem paralyzing without the right partner. Oftentimes, time lines are tight and financing is needed quickly, it’s crucial you work with a finance company experienced in your situation.

What other strategies do you use to help manage cash flow and risk?

Photo credit to raja4u at

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