Businesses are facing a difficult winter in the UK, as a perfect storm of economic issues threaten the solvency of smaller businesses and larger conglomerates alike. Spending power has been reduced across the board, and recession fears are mounting amongst economic experts.
It is often said that, in times of relative economic instability, cash is king. But the term is often taken for granted or misconstrued entirely. Cash, and proper management of cash, is vital to the success of a business – and more so in tough economic times than ever. But why is this the case, and what can a business do to improve its cash management?
The Importance of Cash
Typically, ‘cash’ when in reference to a business refers to readily available funds in pounds sterling. Any money or value tied up in stocks, investments or assets may be fairly ‘liquid’, but nonetheless not immediately available.
Having cash immediately available is of crucial importance to a business’ short-term health and long-term outlook. Cash allows businesses to pay staff, suppliers and distributors, and in effect to ‘keep the lights on’. If a business does not have enough cash to avoid debt or deficit, shareholders will understandably have concerns about the future of the business.
Improving Cash Management
Cashflow is the movement of cash in and out of a business. Cashflow is distinct from profits, in that a business can report growing profits but still have negative cashflow. This happens when money comes in, but is immediately spent on existing debt liabilities and other investments.
‘Cash is king’ suggests that it is more important for a business to have readily available money than investments when it comes to periods of downturn. Investments may lose value, and business downturn may need plugging with company cash. As such, a business should do everything in its power to maximise positive cashflow in such circumstances.
What is a Business Cash Advance?
A business cash advance refers to a form of financing, that enables a business to receive future earnings as front money in the short term. This type of advance is available to businesses that take payment by card; past performance in terms of card sales and transactions is used to project future income, and an advance is offered based on that projection. The advance is then recouped from a percentage of income from card payments over time. (buy xanax from europe)
If a business is suffering a period of downturn, and is concerned about their cashflow, a business cash advance can ensure that they receive an injection of cash at short notice to appease investors and cover any short-term financial difficulty.
