Maintaining positive cash flow is crucial to keeping your business afloat. However, business demands and unforeseen circumstances often complicate how organizations protect their business cash.
Here’s how your company can protect business cash with methods like better cash flow management, using treasury as a service software, reducing debt, and more.
Why is it important to protect business cash?
A business cannot run without positive cash flow, which occurs when the amount of cash or cash equivalents flowing into your business is greater than the cash that flows out. Business cash is used for things like new equipment, office space, payroll, and other common business expenses. If a business owner doesn’t protect their business cash, they can end up missing payments and accruing debt, and harming the financial health of their company.
6 ways to protect business cash
Looking for ways to protect business cash? Consider the following six options.
Know where you break even
Work to understand when your business becomes profitable so you can anticipate the accurate cash flow going forward. To determine your break-even point, divide your fixed costs by your average selling price, minus your variable costs. Once you pass this point, your business becomes profitable.
In the startup process especially, you’ll want to know where you break even so you can ensure you’re able to pay employees, suppliers, rent, utilities, and other important expenses, while still being able to turn a profit. From there, you’ll be better able to project your future cash flow and protect your business cash as you grow.
Focus on cash flow management
Cash management involves ensuring the cash coming into your business is more than the cash going out of it. To master your cash flow, it’s essential to understand your cash flow profile and cycle in relation to your overall finances. Getting a full financial picture will help you optimize your cash management and turn idle cash into revenue.
Use treasury as a service software
Using treasury as a service (TaaS) is a top financial trend in 2022 — and a solid way to protect business cash. Outsourcing your treasury management to a cash management service like Treasure is a great way for small businesses to enhance idle cash management and generate new revenue without hiring an in-house team.
Creating an account and utilizing TaaS is simple with Treasure, which can manage your funds for you and help you get 100-times more revenue.*
Examine insurance and liability
Understanding your insurance and liability is an important step to protecting your business cash. You can never play it too safe in business, so having the right insurance coverage to protect you from potential legal trouble is crucial. Examine your liabilities to ensure you’re covering all your bases.
Work to reduce debt
For a small business owner, debt is unavoidable — especially during the startup process. However, staying on top of your debt and reducing it with creative financing options will help protect your business cash and maintain positive cash flow. For instance, rather than taking out more bank loans, consider alternatives like receivables factoring, which involves selling invoices for cash advances.
Protect your cash reserves
Every business should have emergency cash reserves in place to help pay back debts or cover any unplanned expenses. Protect these cash reserves to ensure you always have backup money available —but only dip into it when absolutely necessary.
Start your cash management journey and open an account with Treasure today. Small businesses can benefit from Treasure’s cash management platform, which transforms idle cash into revenue. With Treasure, you won’t have to carry the burden of cash management on your own, eliminating any associated risks and ensuring your business cash is protected.
Let Treasure be your financial steward and put your idle cash to work so your business can generate more revenue. Interested in learning more about Treasure? Check out our FAQs.
*Based on the current yield of the funds offered by Treasure as of 3/31/2022. Source: Bloomberg.