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Is your business in a growth cycle? Effectively handling your liquidity, or excess cash, is crucial for profitability if your company is building capital.

There are numerous ways to best manage and maximize your excess cash. So, it’s vital understand the big picture concerning your financials, and review the best tools for your company.

After all, your cash-management approach should include both short-term and long-term goals.

Here’s how:

Analyze your liquidity

Monitor your cash flow and forecast how much money you’ll need for your basic expenses.

Of course, that includes insurance premiums, payroll, mortgage or rent and payroll.

Develop an overview of your needs and opportunities

In terms of cash flow, identify your opportunities to make your spare cash work hard for your business. Focus on ways that your cash will work to improve your future cash flow.

Identify short-term and long-term strategies, but be sure of the timing needed for each.

You must understand your appetite for risk and any special requirements before you develop your objectives.

Get expert help either a team of analysts or a mentor who understands your business and marketplace.

This would be to help you create a plan and to help you fine-tune it later depending on your growth and needs.

Talk with your banker

You’ll want to consider short-term and low-risk ideas to maximize your cash situation but to make certain you have ready access to cash.

Your banker can help you with a liquidity-optimization approach. Again, you’ll need to analyze your income streams and expenses.

Certainly, there are traditional bank products you can select in savings or investment accounts. That might involve time deposit accounts or money market funds.

Review long-term opportunities

Some examples of long-term opportunities:

Even in our strong economy, review your cash reserves to see if you need to increase your emergency fund.

Invest as much cash as you can back into your business – whether you want to expand your marketing reach, improve your products, develop new products or to invest in your human resources either in training, salary increases or bonuses.

Maximize your capital expenditures such as in buildings, real estate or equipment that you know you’ll be able to maintain for year-end business tax deductions.

Consider the pros and cons of buying another business or investing in a small business.

Review your retirement-account situation. If you don’t have a retirement account for you and employees, establish one.

An employer-sponsored fund will help you keep talented employees or attract new workers.

Determine whether you need more expertise

For broad solutions with a comprehensive financial plan, you might need a financial partner.

It doesn’t hurt to get a second opinion for effective margin controls and liability budgeting.

This would be someone who grasps your big-picture situation to help you develop and implement strategies to boost your cash flow and operations.

From the Coach’s Corner, here additional relevant tips:

Enhance Your Future Profits by Avoiding Biases in Budgeting – If you want to improve your budgeting process, you have to identify and address your biases. Here’s how.

Best Financial Strategies for Your Business Plan – When updating your business plan as an established company or writing it as a startup, be sure to intensely focus on the financial section. Here’s how.

For Accuracy and Profits, 14 Small-Business Finance Tips – Being defensive is a key for you in small business finance – making sure your technology, bank accounts and bookkeeping are secure and in the best-possible shape.

HR: Marketing High-Deductible Health Insurance Plans – High deductible health plans can be great to save money for employers and employees, alike. However, due diligence is required.

Even in Our Strong Economy, Build Your Emergency Fund – OK, so the economy is strong and sunny. But here’s a reality check: When businesses fail, probably 80 percent crash because of poor cash flow. Establishing an emergency rainy-day fund is not an option. Don’t get soaked. Here’s what to do.

“Revenue is vanity, profit is sanity, but cash is king.”



Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.