If a firm can manage effectively their available resources, it might not seek external financing from financial institutions. Adequate working capital allows daily operations of a business to be run effectively. This can be realized if the available funds are utilized properly to meet the allocated needs and enable the company to cater for unforeseen contingencies. Below are the reasons for maintaining adequate cash flow in an enterprise.
It enables an organization to maintain an adequate flow of production. Continuous production ensures that goods are produced with no shortages. That is, it ensures that all factors that are necessary for production to take place are available. This will ensure that finished goods are produced and sold which increases sales which in turn raises the cash at hand. Therefore, it ensures that business solvency is well maintained.
When there is a continuous supply of raw materials, it means that production is also continuous. This is attributed to the ability of the business to meet their obligations to suppliers. When there is the production of goods, it increases sales turnover which increases cash at hand. The cash is then used to generate extra income which then translates to increased profits. Therefore, if firms can manage their account receivables and payables it leads to generation of profits.
When a company can manage their liquid cash it means that it is using the available cash efficiently. This is beneficial to the firm as it can generate extra money using their managed liquid cash without depending on external financing. This is very vital for a small growing business whose access to external finance is limited by its creditworthiness. Also, small enterprises often pay their suppliers using the available cash which enables them to efficiently manage their finances hence proper allocation of resources.
Firms who are able to manage their liquid money are able to produce their goods in large quantities. When the goods are enough is satisfies their customer needs which may lead to increases in their supply chain. When customers buy goods quantities, the firm can offer discount and low prices for those who buy in bulk. With this strategy, firms can get access to large market and take advantage of the competitive market.
When the enterprise can maintain its operational capital it is able to receive a regular supply of raw materials. Production cannot take place if the supply of raw materials is cut. This might be caused by delays in paying suppliers who may stop from supplying. When production is not taking place, it means there no goods and services to be sold to the market.
Businesses who can manage their available cash, are in a position to meet the crisis. Emergencies are unpredictable and therefore occur anytime. When business is not able to meet the crisis, it possesses a danger to the business which may lead to collapse. By managing cash flow properly, the firm can allocate some amount for emergencies. This beneficial because the business is able to curb emergencies and still resume its daily operations as usual.
Firms must maintain good cash flow to work efficiently. It allows for efficient supply chain and can produce in large quantities. This attracts a high number of customers which the firm can offer discount hence enjoying a competitive advantage. Good management of finances enables the firm to enjoy a variety of services.
It enables an organization to maintain an adequate flow of production. Continuous production ensures that goods are produced with no shortages. That is, it ensures that all factors that are necessary for production to take place are available. This will ensure that finished goods are produced and sold which increases sales which in turn raises the cash at hand. Therefore, it ensures that business solvency is well maintained.
When there is a continuous supply of raw materials, it means that production is also continuous. This is attributed to the ability of the business to meet their obligations to suppliers. When there is the production of goods, it increases sales turnover which increases cash at hand. The cash is then used to generate extra income which then translates to increased profits. Therefore, if firms can manage their account receivables and payables it leads to generation of profits.
When a company can manage their liquid cash it means that it is using the available cash efficiently. This is beneficial to the firm as it can generate extra money using their managed liquid cash without depending on external financing. This is very vital for a small growing business whose access to external finance is limited by its creditworthiness. Also, small enterprises often pay their suppliers using the available cash which enables them to efficiently manage their finances hence proper allocation of resources.
Firms who are able to manage their liquid money are able to produce their goods in large quantities. When the goods are enough is satisfies their customer needs which may lead to increases in their supply chain. When customers buy goods quantities, the firm can offer discount and low prices for those who buy in bulk. With this strategy, firms can get access to large market and take advantage of the competitive market.
When the enterprise can maintain its operational capital it is able to receive a regular supply of raw materials. Production cannot take place if the supply of raw materials is cut. This might be caused by delays in paying suppliers who may stop from supplying. When production is not taking place, it means there no goods and services to be sold to the market.
Businesses who can manage their available cash, are in a position to meet the crisis. Emergencies are unpredictable and therefore occur anytime. When business is not able to meet the crisis, it possesses a danger to the business which may lead to collapse. By managing cash flow properly, the firm can allocate some amount for emergencies. This beneficial because the business is able to curb emergencies and still resume its daily operations as usual.
Firms must maintain good cash flow to work efficiently. It allows for efficient supply chain and can produce in large quantities. This attracts a high number of customers which the firm can offer discount hence enjoying a competitive advantage. Good management of finances enables the firm to enjoy a variety of services.
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