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 Businesses live and die by cashflow, not their theoretical profit margins. If your business has turned a profit so far this year but you have no ready cash on hand, you may be losing out on a range of opportunities.

 

Of course, you don't want to keep cash for the sake of keeping cash, but knowing how to add to your reserves is a useful skill that can make all the difference in the world. Cash reserves can be used to pay off debts to decrease your liabilities, re-invest in the business for new growth, or of course they can be paid out as a dividend to the owners. Here are five handy ways that you can boost your cash reserves to help expand your business:

 

Growing a business can be extremely expensive, and one of the biggest hidden costs is inefficiency. Often during phases of rapid growth, budget bloat grows as various aspects of the business require increased resources to cope with the level of growth. While it may not be immediately clear what is necessary and what is not, it is extremely valuable to take the time to examine the workings of each department with an eye to what is required and what isn't.

 

Along with reducing costs, reducing your on-hand inventory can make a huge difference to your cash reserves. If you're operating a retail sales business this is fairly easy to do, as you simply need to lower the amounts of each product you stock - though it may be best to keep high-turnover items in full stock to ensure you don't lose out on any sales. If you run a service-based business, it may seem like inventory can't be an issue, but consider all the daily use items around the business. You probably don't need to keep a huge stock of pens, printer ink cartridges or bales of paper when they are so readily available.

 

It's always important to pay your suppliers and other recurring debts promptly, but there are other ways to increase the time between receipt of goods and services and making payments. If possible, try to renegotiate payment terms with your suppliers in order to give you more flexibility with your cash reserves.

 

Cutting costs can only take you so far, and boosting your sales is a no-brainer way of increasing your cash reserves. Many businesses are already quite good at bringing in sales, however, so don't rely too much on a sudden increase in customers unless you're willing to look at a substantial change in your business marketing.

 

One of the biggest problems faced by businesses is found in the accounts receivable department - the money owed to you by your clients. Late payments affect up to 60% of businesses, and can have an extremely detrimental effect on your cash reserves. Perform a regular review of your outstanding invoices, and make sure that you follow up with clients to ensure that they pay on time.