Delaying Cash Outflows
Cash outflows are the movement of money out of your business. A few examples
of cash outflows are paying expenses, purchasing property or equipment, or
paying back a bank loan.
The key to improving
your cash flow with regard to cash outflows is to delay all outflows of cash
as long as you possibly can. However, you still need to meet all your outflow
obligations on time. Delaying cash outflows makes it possible for you to
maximize the benefits of each dollar in your own cash flow. Seeing the benefit
of delaying your cash outflows is the first step in managing them.
The proper management of cash outflows requires you to track and manage your
Managing your cash outflows also requires that you follow one simple, but basic
rule: Pay your bills on time, but never pay your bills before they are due.
credit is an important tool for managing your payables and expenses.
Without trade credit, you'd have to pay for all your purchases of
merchandise and services at the time of purchase (or use a business credit
card). Instead, trade credit allows you to defer cash payments to suppliers
until a later date, without calling credit card interest and limits into
a trade discount is one exception to our basic rule regarding paying
your bills. A discount may be available if you pay your bills quickly,
within a certain time period.
to take a trade discount: how do you know if it's worth taking the
discount? We show you how to calculate your savings.
case study on trade discounts illustrates how a small business decides
to take advantage of a discount, or not.
payment terms with your suppliers and vendors, or deferring expenses,
are two more methods of delaying your cash outflows.
the float between when your check is written and when it is cashed is a
common, but somewhat risky, way handle a temporary cash shortage.