Question

What are the different management strategies to retain and increase cash?

Answer 1

the different management strategies to retain and increase cash are-

1)Preparing to make investments

As your firm grows and becomes more successful, costs will likely rise. However, before your firm dives into new ventures, it is crucial to evaluate your current financial state. Determine current cash inflow and outflow and discover if a larger venture is financially feasible. Once it is clear that the firm is able to maintain a consistent cash flow, your firm should consider the additional costs that will come along with your new investments. With a better understanding of your financial health, an educated decision for moving forward becomes clear.

2)Know Your Limits

It is important to know how far you can stretch financial capital and the point at which you will begin to turn a profit. Using necessary tools—for example, a cash flow forecast—will help you determine the cash flow management strategies that are right for your business. Make specific cash flow goals based on these limits and adjust goals as new information comes in.

3)Deposit Cash Balances in Interest-Earning Accounts

To boost your cash reserves, invest them in interest-bearing accounts. Not only will this help you stock up for the future, it will be an additional source of income. Many banks offer interest-earning savings accounts or certificates of deposit with higher interest rates.

4)Ask customers to pay faster

Another option for managing cash-flow is to get customers to pay faster. This can take several forms. The simplest form is to give vendor discounts, where 2/10, Net 30 terms would entail giving customers a 2% discount if the invoice is paid within 10 days. Otherwise, the full amount is due in 30 days. This can be an attractive proposition for a company’s customers, as it allows them to make the equivalent of a 73% APR in ten days just by paying their bills faster.

5)Sell future revenue

A merchant cash advance is a viable strategy for consumer businesses like retailers and restaurants. It involves taking a loan that is automatically repaid via a percentage of the credit and debit card transaction volume received by the business. This strategy is especially viable for businesses with strong transaction history. Just make sure that the company’s margins can support the cost of the financing. Otherwise, they could be paving their way to financial ruin.