Steps to protect your cash reserve

Business owners are beginning to understand more and more, the importance of having a cash reserve. In an economy that is continually tightening down on credit, business owners who have a cash reserve are far more likely to be able to sustain their businesses through difficult times. It is crucial to keep in mind that you need to have a plan on how to deal with large money needs, should you be able unable to secure business credit. Your cash reserves can be what keeps you going through the difficult times, but you need to know how to best maintain and manage, that money. Here are steps to protect your cash reserve-

• Diversification is important-When you are dealing with money, it is never a good idea to put it all in one place. This is especially true when it comes to the cash reserve of your business. You want to make sure that the money you are using for your business cash reserve is put into several different places, in order to keep it safe and protected. You may be surprised to learn that marketing also falls under diversification. While you should continue marketing, no matter what the current market conditions are, you need to understand that 80% of your sales come from your existing customers. Your marketing plan should encompass both the customers you have and the customers you want to attract. This way you are always creating more streams of income, from different sources, to fund your cash reserve.
• Check your business finances-Many business owners make the mistake of turning over the finances of their business to someone else, and then never checking on them. You want to make sure that you constantly know what is going with the finances of your business. This is the best way to determine if you are doing everything you can in order to sustain your cash reserve. In addition, it can keep your accounts receivables current, which is a major part of improving cash flow and creating cash reserve.
• Cut the spending-A major part of improving cash flow (and freeing up money for a cash reserve) is to cut spending. It is important to focus on generating the right amount of money to cover the essential expenses, while still avoiding overspending. You may want to consider negotiating with both your vendors and any credit card companies that you deal with, in order to gain better terms and free up money, for your business cash reserve.
• Update your business plan-If you see that you have an upcoming financial need and insufficient cash reserve to cover it, then now is the time to update your business plan. You will need an impressive and well written business plan, if you have to turn to debt financing, to cover your money needs. Taking the time to update your business plan can also help you to chart out your business goals and develop a plan, for achieving them. You can also focus on other areas of the company that may need to be brought in line, in order to gain a better cash reserve. Best of all you can use your business plan to help you adapt to market changes, and stay current in your industry.
• Work on collections-Often times business owners fail to see that they have a great deal of cash at their fingertips, in their accounts receivables. You need to enforce a timely and prompt collection with your customers. There is no need to let that cash sit uncollected, when it could be working for you. Establishing an effective collections policy is an integral step toward creating the right amount of cash reserve, for your business.