As a small business owner, effectively managing your assets is important for both short-term cash flow and long-term growth. With limited resources compared to large corporations, every investment decision counts. You want to maximize returns on your capital while minimizing downside risks. This article outlines key asset management strategies tailored for small business owners looking to make the most of their assets.
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Conduct Regular Reviews of Asset Performance
Set aside time at least quarterly to thoroughly review the performance of all your assets – cash, accounts receivable, inventory, fixed assets like equipment, and investments. Assess if each asset is optimally structured and aligned to your business goals. Are there assets not earning adequate returns? Are any risky or obsolete? Update asset allocation if needed to boost returns and better align with the business strategy.
Manage Cash Wisely
Cash is king for any small business. Review cash flow regularly and project future needs based on growth plans. Work to optimize conversion cycle – the time from paying suppliers to collecting from customers. Consider negotiating better credit terms with both suppliers and customers to improve working capital. Target an optimal cash buffer to fund operations and as reserve for unexpected needs. Invest excess cash wisely in liquid instruments that generate better returns while allowing easy access, like short-term government bonds.Enhancing Security and Preventing Fraud
Built on cryptographic principles, blockchain-based networks are extremely resilient against data tampering, hacking and fraud. Every transaction is validated through a process called consensus where all nodes in the network must approve it, eliminating single points of failure.
Once data like transactions are recorded on blockchain, it is near impossible to alter them retroactively. This helps prevent issues like fake transactions, identity theft and hacking that have plagued the conventional financial sector. Financial applications developed on blockchain are thus inherently more secure and fraud resistant. The ability to effectively detect and overcome fraud will be a major relief for the individuals who struggle with it.
Accelerating Transaction Times
Clearing and settlement of transactions in the mainstream finance sector can often take several days due to legacy systems as well as verification and regulatory requirements. Blockchain allows near real-time clearing and settlement of asset transfers and payments by enabling trustless peer-to-peer transacting. Without labor-intensive reconciliation processes, transaction times and costs are slashed significantly. For instance, cross-border payments that earlier took over a week can now be completed via blockchain within minutes. Financial services built on blockchain thus enable faster execution.
Improve Billing and Collection
Accounts receivable can quickly accumulate and tie up capital if not managed tightly. Invoice customers promptly after delivering goods/services. Offer incentives for early payment. Follow up persistently on unpaid invoices. Consider third-party credit control services for difficult accounts. Write off bad debts for tax benefit. Tight billing and collection practices will help improve cash flow and working capital.
Optimize Inventory Management
Carrying excess inventory strains working capital. Make sure stock levels match sales demand. Follow inventory management best practices like ABC analysis to categorize products by revenue/margin contribution, setting appropriate stock levels, tracking shelf life of perishable goods, and monitoring obsolete items. Consider just-in-time approaches to order inventory as needed. This frees up capital while minimizing waste and storage costs.
Rent or Lease Equipment over Buying Outright
For fixed assets like vehicles, computers, machinery and equipment needed for operations, consider renting or leasing options over large outright purchases. This preserves capital for higher-return investments. Leasing also keeps fixed assets liquid, allowing for easier upgrade to newer technologies. Build in bargain purchase options on long-term leases to retain equipment with more useful life at lease-end.
Invest Surplus Assets Wisely
Parking idle funds in low-interest savings accounts is unwise in inflationary environments. Assess options to invest surplus assets and cash buffers not needed for daily operations. Possibilities like short-term bonds, fixed deposits, debt mutual funds, and secured loans provide relatively liquid returns between 6-9% generally. The extra buffer return can directly boost bottom line. Though tempting, avoid investing operating funds in volatile instruments like stocks or digital currencies.
Insure Adequately Against Risk
Mitigate risk by taking adequate insurance coverage on all major assets – property, equipment, vehicles, key employees etc. While this adds costs, insurance payout in adverse events like accidents, natural calamities, fires etc. can make the difference between surviving or going bankrupt. Review insurance policies annually and adjust coverage to align with asset values. Consider adding revenue/profit loss riders to recoup income lost.
Build Credit Rating to Access Low-Cost Funds
As a small business, relying only on internal funds limits growth. Having a strong credit rating allows you to fund expansion through low-cost lending options. Start building credit history early through prompt repayments on any small loans taken. Provide personal and business tax returns, bank statements when applying for new loans.
Once credible 3 years operating history is available, approach banks, NBFCs, FinTech lenders for facilities like overdrafts, working capital loans, asset financing, and restructuring existing high-cost debt. This strategy provides affordable growth capital to scale faster.
Adopt Digital Tools to Enhance Asset Management
Sophisticated digital tools now allow small businesses to better track, manage and optimize utilization of assets. Low-cost software solutions help create detailed asset registers showing purchase dates, warranties, depreciation schedules, leasing terms etc at individual and category levels. Built-in analytics offer rich insights on usage patterns and return on assets. Some solutions even automate inventory management, cash flow forecasting, collections management and policy renewals. Adopt user-friendly solutions suited to your industry to boost asset productivity.
Evaluate and Monetize Unused Assets
As your small business evolves, you may end up with some fixed assets that are no longer critical for daily operations. But before writing off these unused assets, explore if they can be monetized through sale, rental or staging asset-based financing deals. For instance, you could sell older equipment and vehicles to generate cash for new purchases. Or unused warehouses could be leased out to other firms for rental income.
Idle assets could also be offered as collateral for loans to access working capital, keeping ownership with you. Getting creative about deriving value from unused assets helps boost returns on overall capital invested in the business.
Exit Unproductive Assets
Be proactive about pruning assets that despite best efforts drag down overall productivity and returns. These typically include obsolete inventory that costs more to store than to write off, bad accounts where further recovery efforts are fruitless, non-core equipment, vehicles or properties. Disposing or selling such assets releases capital that can be allocated to faster growing, higher-margin activities. This optimizes overall asset returns.
Seeking expert advice when needed also helps steer the right asset strategy for your small business. Accountants, financial advisors and industry consultants can offer specialized know-how on tailoring asset management frameworks per unique needs and challenges of your business.
As you can see, managing assets astutely is vital for small business survival and success. Regularly review portfolio health, minimize risk through insurance and credit-building, invest surplus strategically, adopt technology and prune unproductive assets. Keeping assets productively working at optimal capacity drives stronger cash flows, sales, margins and faster business growth. The time invested in actively managing assets is well worth the long-term payoff.
