As each business goes through different phases, even in short periods of time, it is essential to adapt quickly to each situation and moment. This flexibility depends a lot on how resources are managed and how easy it is to get financing quickly and cheaply. Good financing helps to cover investment needs, adjust to changes in demand and have sufficient liquidity for day to day.
The keys to the financial structure
Taking care of your finances is increasingly important in companies, now becoming the figure of the Chief Financial Officer (CFO), one of the key positions in the business organization chart. In financial planning, the challenge is to know how to anticipate needs, manage resources well and better calculate costs and terms to obtain credit under the best conditions.
Taking these objectives as a reference, we offer these five recommendations to improve financing:
1.-Differentiate short-term and long-term financing
You have to plan the objectives and adapt the financing to each need. Investments should be projected with long-term financing with the intention of extending the loan and repaying most of it when the investment begins to bear fruit, and not before. To guarantee operational functioning, it is advisable to use short-term, stable and agile instruments, with discount operations on commercial assets being a good solution to advance liquidity without assuming debt.
2-Strengthen the balance sheet and avoid excessive indebtedness
Reinforcing capital is one of the pending subjects in many companies. It is necessary to strengthen and improve the operation of own resources and control the indebtedness threshold in relation to operating results. Getting into debt should serve to grow and not to cover some debts with others. If the debt is too high, it raises financial costs, limits flexibility in the face of unforeseen expenses and implies operational and solvency risk.
3-Preserve liquidity
It involves monitoring accounts payable and receivable, and designing an action plan to avoid financial imbalances. The delay in payments is one of the most serious problems for companies, with a serious risk in the short term to meet current obligations. It also means evaluating customers well and taking care of deadlines and collection management. It is vital to ensure that the cash flow remains stable to cover all the needs of the company.
4.-Calculate financial costs
The real cost of financing goes beyond comparing the interest rate. You have to study all the service commissions or the obligation to hire other products, so common in banking operations. These factors can raise the spending forecast considerably and put further pressure on the accounts. Having the greatest transparency is essential in financial operations.
5-Diversify funding sources
The dependence on a single source of credit has been one of the most important blocks for businesses. It is essential to identify new opportunities to raise funds and, among them, alternative financing. Diversification widens the opportunities to find the best solution at the lowest cost for each need.
Under this perspective and with a good internal diagnosis, based on reliable and updated information that facilitates data analysis, better financing decisions can be made, gaining efficiency and reducing costs and risks.