How to use your assets to manage your business finances

In attempting to improve business finances, small business owners often overlook one of the easiest solutions. Using business assets, (or what you already have), can be a productive tool in improving finances, for your business. There are a number of ways you can do this, and each small business owner, must determine the right actions to take if they choose to undertake this method of cash management. This is important because if assets are handled correctly, it can improve the financial standing of the business, however, failure to free up the correct assets, or doing it the wrong way can quickly bring about the failure of the business. Here is what you need to know about how to use your assets to manage your business finances.

Work to reduce accounts receivable balances- To often businesses are carrying to high of an accounts receivable balance. This is especially true of small businesses.There are steps that can be taken to reduce account receivables and help better manage the overall business finances. These include:
1. Making sure that the billing function is both streamlined and secure.
2. Making sure that there are sufficient internal controls to ensure that all sales orders, or jobs,are billed as soon as possible, preferably immediately after the sale,or completion of the work.
3. Making sure everything possible has been done to reduce the periods between sales orders and deliveries, or between work requests and the start of work. It can also be helpful to reduce the period between deliveries and billing, and invoice immediately upon shipment, or completion of the work.

Businesses of every size must make it a priority to understand that while the credit terms that are granted to customers, are an important part of a business's sales and marketing strategy, this is an area that needs to be closely monitored and managed. While it is normal for businesses to carry balances of accounts receivables it is crucial to make sure that this is not an untapped asset, for the health of the business' finances.

Work to bring about an inventory reduction-While the amount of inventory that needs to be kept on hand will depend on the characteristics of each business, it should be noted, and that inventory should not be reduced to the point where sales are negatively affected. Every business owner should understand that there are strategies that can be used to reach a proper balance. When a proper balance is reached, then inventory levels are kept down, while still satisfying customer demand. Some of these steps are-
1. Increase the frequency of stocking, rather than holding a large quantity of inventory over longer periods of time.
2. Always plan ahead based on sales and production forecasts, building in any necessary lead time.
3. Make arrangements with suppliers, to hold inventory, or to produce and deliver, based on short turnaround times.
4. Reduce the number of products, or components.
5. Wait to replenish inventory as sales orders are being shipped.
6. Integrate and coordinate the purchasing, production, inventory, and sales functions.
7. Consider liquidating deteriorated or obsolete, items in inventory.

Work to utilize fixed assets-Many small businesses, (especially during the startup phase), may not have sufficient assets to purchase fixed assets. This may even include machinery and equipment that are needed, for a production process. However, there are certain steps that can turn the management of fixed assets into a positive for your business finances. These include-
1. Consider subcontracting part of the production process, to another business that has the necessary machinery and equipment.
2. Consider renting equipment rather then purchasing it. This is especially helpful if certain equipment is needed only occasionally, (but not on a regular basis).
3. Consider leasing vehicles rather than purchasing them.