Free cash flow: Free cash flows are the number one reason for Australian companies making the leap from a cash-strapped to a cash surplus.
But the cash-flow numbers are often hard to come by, and even when they do exist, they are often murky and subject to manipulation by tax authorities.
Here are four ways to cash out on your money, and the best ways to do it quickly.
How to use cash flow to cash your way out of debt: A common misconception is that a company’s cash flow is the main driver of profitability, and that a business will be in trouble if it has too much cash in its balance sheet.
But cash flows also contribute to a company achieving profitability by lowering its cost of capital, reducing expenses, and boosting its cash flow.
So if your company has too many cash flows, it could actually help you achieve profitability.
To maximise cash flows: It is not enough to simply cash in your business on the back of a lower tax bill.
You must also consider whether you need to reduce or increase your expenses.
How do you decide whether you can afford to pay more tax or reduce your expenses?
How can you make the best use of your cash flows?
Here are a few tips to help you decide.
Investing in your cash flow How much should you be investing in your financial health?
You can’t rely on your cash-flows to provide all the cash you need.
This means investing in cash flow will be key to making the best-in-class decisions about how much cash you can leave on the table to take advantage of tax cuts.
Here, we’ll look at five simple strategies for maximising your cash on hand and making the most of your money in the short and long term.
The cash you’ve got: In the short term, there are three main strategies to maximise your cash and keep it out of your account.
If you are in the early stages of investing, consider whether there are any cash-to-cash ratios in your balance sheet that are too high, too low, or not well-managed.
A balance sheet of $10,000 is probably going to be worth less than $3,000, for example.
If your cash balances are at the very bottom of the range, it might be worth investing more into your cash balance, but it might also be worth keeping your cash level down, if you have enough money left over to do so.
Invest in your operating cash flow When you are investing in operating cash flows to improve your cash position, it is important to consider how much you can actually make in the long term, and whether you will need to reinvest the extra cash you make into your company.
It is also important to remember that your cash positions are often the result of years of careful management.
Invest at the right time: If you invest in cash flows as part of a larger investment, the cash flows should be invested within a couple of years.
If the timing is wrong, it can be difficult to find cash in the accounts you need, and can leave you stranded.
If this is the case, there’s a simple way to avoid the problem.
In addition to the cash flow strategy, it’s also important that you reinvest the cash into your business, in order to boost your cash levels.
This is called operating cash-out.
If there is too much capital in your account, the operating cash out strategy might not be worth pursuing, and it may even backfire, since you might not get the extra profits you want.
In either case, it will help to have a better understanding of the cash position.
Invest the cash in a diversified portfolio To maximising cash on board, it helps to diversify your cash holdings.
You can either focus on your business’s core business, or your core assets.
There are many different ways to diversifying your cash, depending on how you value your business and how you think about the cash balance.
But when it comes to cash-in, it pays to understand what the long-term impact is on the company and how much money you need for it.
If all you’re doing is investing your cash in something that will have a long-lasting positive impact on your company’s future, you will end up with a much lower overall cash balance and more cash-equivalents.
But if you are looking to make money quickly, there is no better way to do that than to focus on the businesses you are most interested in, rather than the businesses that you will be losing money on.
How much to diversise your portfolio: What kind of diversification strategy is right for you?
Here’s what you need in your portfolio to maximised cash on your board: The business you want to diversitate your portfolio towards.
If it’s a business that can produce income and profits in the future, then a diversification plan that focuses on this business is the best choice. If