Get set for growth in 2010
Step 3: Create a safety net
Every business needs a little extra cash from time to time. If you’re expanding rapidly, you may also need some longer-term capital for new assets. So it’s important to plan ahead and make sure you’ll have access to the cash you need when you need it.
Your goals
- Access extra cash when cash flow is tight.
- Access long-term capital without starving your business of cash for day-to-day activities.
- Drive down your overall cost of funds.
Tips
- A business credit card, overdraft, or line of credit can provide a short-term cash injection. You only pay interest on the money you use, so you can keep costs under control. In the meantime, you have the confidence of knowing that there’s a cash flow safety net if you ever need it.
- Business loans or asset finance can be good choices for longer-term capital.
- By choosing the right financing option for each purpose, you can reduce your overall cost of capital. Your business banker can help you choose.
- Try to match the life of a loan to the life of the asset you’re buying. That way, the asset can potentially pay for itself from the income it produces.
Step 4: Make the most of cash on hand
Most businesses process large amounts of cash earmarked for a particular purpose, like GST or payroll. By putting that cash to work, you can earn a little extra revenue, while still covering your obligations.
Your goals
- Maintain cash reserves for GST, payroll and other obligations.
- Make every dollar count.
Tips
- By parking cash on hand in a high-interest savings account, you can earn extra revenue, even if you’re only holding it for a day or two.
Symon Brewis-Weston is the Executive General Manager of Commonwealth Bank Local Business Banking, a specialist division dedicated to the needs of small business clients. For further information please visit http://www.commbank.com.au/business.
Important information: As this advice has been prepared without considering your objectives, financial situation or needs, you should before acting on this advice, consider its appropriateness to your circumstances. Commonwealth Bank of Australia ABN 48 123 123 124.