Capital Management Strategies for Businesses
We recently had an engaging Virtual HASH LXN (LearnXNetwork) talk with our Founder and Managing Director Renee Tan, our guest speaker, Chief Financial Officer and Fellow Chartered Accountant, Gail Shan together with participants online, discussing about ‘Capital Management Strategies for Businesses’.
Key takeaways or areas from the discussion are as follows:
What are the 3 basic fundamental principles when running a business?
- Buy low, Sell high
- Collect fast, Pay slow
- Accumulate good quality assets
How to leverage on current resources
Stretching 4 types of assets
- Physical cash at hand or in your bank
- Quickly recollect whatever money is due in order avoid any outstanding financial debts.
- Any current assets are still remaining inside a stored warehouse or shop.
The main objective in today’s current business landscape should be to survive. Surviving means selling your whatever remains at a discount or whatever price a customer is willing to pay for. This in the end enables you to get more cashflow back, clear your stocks as fast as possible and more importantly, to retain your existing customers as well as clients.
4) Long Term Assets
- Physical space or objects that generates long term future businesses. For example, the office building and machinery.
- Payment orders from customers which have not been fulfilled yet.
- Money owed to service providers. Either renegotiate with your providers on the terms and what would be best way to repay back during these trying times or look for grants to reduce your expenses.
- Borrow money from shareholders and offer them a better value that is above market rates.
- Share whatever future profits which are earned with them.
Preparing for the future
- Rank customers by % profit which they have contributed to your sales.
- Review their financial situation and payment history.
- Identify and build long term relationships with them.
2) Rebalance cost structure
- Terminate loss-making businesses
- Lower fixed costs
- Outsource high-cost but low value business activities.
3) Optimise organisation structure
Identify who are the key employees that are capable managers.
- Delegate power to capable managers.
- Turn managers into business partners.
- Independent profit and loss.
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