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5 Strategies Of Turning your Profits into "Cash"

Posted on December 8, 2014 at 2:29 PM
  
The Holidays are here and it's time to ensure that we have some cash tucked somewhere for the Holiday Shopping, Gifts, Christmas Parties, as well as Year-end Savings.
In our last Newsletter, we uncovered the myth of profits, and learnt that, understanding how transactions occur in our business and its effect on our financial statement is key to managing our profits. Please feel free to refer to our last newsletter for the full details. This Month, We will be looking at 5 strategies of turning our Profits into "Cash":

1 ) Cash is King:
Every company experiences an increase or decrease in Cash availability at any given period; the basic key to turning your profit into "Cash" is what you do, when you have made a Great Sale and received Payments from a Business Windfall. This should be the period to have a Savings or Cash reserve Account, whereby you can set aside a certain percentage of this revenue and discipline yourself, not to meddle with the account. This is called effective Cash Management, and it takes a lot of discipline, but if taken seriously, you will achieve great results.


2) Plug your Cash Leaks:
A lot of Business Owners are surprised about the waste, inefficiency and unchecked spending of precious Cash that should have remained in their Bank Account, if they have been managed effectively. As a Business Owner, it's possible to have been a culprit of any of these acts:

  • How many times have you paid overtime, because of poor scheduling practices or slow work performances?
  • How many times have you purchased unwanted Goods/Items for your inventory, without taking a stock count of what you have?
  • How often have you incurred unnecessary Bank Charges, overdraft item payments, late fees and finance charges?

It's time to take a forensic trip down your Profit & Loss Statement and try to justify every expense line item, I assure ,you there will be a 5 % more profit ,just waiting to find its way to your bottom line.


3) Take Ownership of your Business Account:
A lot of Business owners tend to mingle their personal expenses with their Business Account. Once you indulge in this practice, your financial reports are contaminated and become pretty worthless, especially when it comes to decision making. It's better to take ownership of your Business Account and maintain it, as a separate "entity" from your personal account. This will help you manage your cash flow better, and hence you will able to pay yourself appropriately. After all, this is the reward of being a savvy business owner.

4) Avoid taking on too much Debt:
Too much debt sucks the financial life out of a company. In our last Newsletter, we learnt how Principal Loan payments occur on the Balance Sheet and are funded by your profit; Imagine what happens when your company is overburdened with debt, Chances are that you will use your Cash flow to continually offset the debts, and this causes your company to be cash starved.
The only way to eliminate debt is to put yourself and your company on a 
"strict debt reduction diet". 
If possible, Stop adding further debt to your company; otherwise have a strategy on how to pay off the debt, if you MUST take on further debts.


5) Have a Budget:
A Budget is a blue print of an estimation of revenues and expenses for a given period in the future. A Budget gives financial direction. A Budget keeps you on track and helps you to manage your cash flow. Preparing a Budget makes you disciplined and faithful to keeping your profits. This is the best time to prepare a Budget for your Business towards the upcoming year.

As we approach the New Year, Why don't you try out these practices and watch your Cash flow grow. You will be surprised at how a few dollars will add up in your Bank Account.

Do you need help with creating your Budget for the upcoming year? Are you experiencing problems with recognizing your expense line items and don't understand how your Cash flow operates? Why don't you give us a Call, We will be glad to help you out.

Happy Holidays.

Categories: bookkeeping, bookkeeping,Tax Returns,QuickBooks,Bank Reconciliations,bookkeeping services,small business, Budgeting,Accounting,Business Planning, Business profit, Cash flow, New Year Resolutions, New Yer Planning, profit, QuickBooks Training, Small Business Setup, Tax Preparation, Tax Returns, Tracking your expenses

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12 Comments

Reply Peter Hans
10:02 PM on December 9, 2014 
Great Topic. This is what I really need to do ,to improve my Cash flow. Thanks for this great insight and information. I will go ahead and put them into practice. Keep up the Good Job.
Reply Intraday Stock Tips
12:47 PM on March 3, 2015 
You said that,the Holidays are here and it's time to ensure that we have some cash tucked somewhere for the Holiday Shopping, Gifts, Christmas Parties, as well as Year-end Savings.I am so grateful to find your particular post. I have bookmarked this website and I will keep visiting you for further such interesting posts.
Reply Rosemary
7:11 PM on March 25, 2015 
You are all welcome. We really appreciate your wonderful comments. We are also glad to know that our tips are helpful to everyone of us and can be applied in every areas of our lives, especially having some cash handy during the holidays. Our Goal is to continue to educate us financially and improve our cash flow. We promise to maintain this. Please stay tuned for more. Thanks.
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