How to improve a company’s liquidity
You can actually calculate a company’s liquidity ratio and devise ways to improve it, according to business graduate and Networth blogger Steve Sorensen. Liquidity refers to the business’s ability to meet its financial obligations as they arrive. There are several ways that it can do this and satisfy these different obligations, including tackling overhead, unproductive assets, and overall profitability.
Reducing overhead
These costs can include things that don’t necessarily produce a profit, or only do so indirectly. It could be rent, utilities, professional fees such as industry memberships, and insurance. You can, for instance, negotiate a better rate for long-term insurance or implement steps to lower electricity costs in the office.
Shedding unnecessary assets or using idle funds
It’s best to shed assets after they no longer produce a profit. It could be a small building that stores used assets or equipment. Instead of paying for the building’s upkeep, the business can open it up for leasing and thus create a new revenue stream. To improve your liquidity, says Steve Sorensen, you can also use idle funds by investing in liquid assets.
Restructuring debt
You can also work with lenders to modify loan terms in order to reduce required monthly payments, a move that can readily improve cash flow and liquidity. Some suppliers and vendors, too, may welcome the idea of negotiating rescheduled payment plans.
A business graduate from the Iowa State University, Steve Sorensen is a blogger on investment strategies and business. He has always been fascinated by the huge and often meteoric growth in net worth of some of the world’s most successfully companies. Learn more about business and investing on this page.
Reducing overheadThese costs can include things that don’t necessarily produce a profit, or only do so indirectly. It could be rent, utilities, professional fees such as industry memberships, and insurance. You can, for instance, negotiate a better rate for long-term insurance or implement steps to lower electricity costs in the office.
Shedding unnecessary assets or using idle funds
It’s best to shed assets after they no longer produce a profit. It could be a small building that stores used assets or equipment. Instead of paying for the building’s upkeep, the business can open it up for leasing and thus create a new revenue stream. To improve your liquidity, says Steve Sorensen, you can also use idle funds by investing in liquid assets.
Restructuring debt
You can also work with lenders to modify loan terms in order to reduce required monthly payments, a move that can readily improve cash flow and liquidity. Some suppliers and vendors, too, may welcome the idea of negotiating rescheduled payment plans.
A business graduate from the Iowa State University, Steve Sorensen is a blogger on investment strategies and business. He has always been fascinated by the huge and often meteoric growth in net worth of some of the world’s most successfully companies. Learn more about business and investing on this page.
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