Managing cashflow and liquidity through new-age solutions

Managing cashflow and liquidity through new-age solutions

To run a successful business, one of the major factors the owner must look out for is the cash flow of the business. 

What is Cash Flow?

This refers to the total amount being transferred out of a business. It refers to the cash or cash equivalents used in running the business. 

Positive cash flow in a business shows that there is an increase in a company's current/liquid assets. This enables a business to settle debts and provides security against financial challenges that may occur in the future. 

Negative cash flow, however, occurs when the operations of a business do not yield enough money to stay liquid.  This can be caused by money being tied up in a business account receivable caused by payment terms. It might also be a result of the business spending more money on capital expenses. 

What does liquidity in a business mean?

This is the ability of a company to exchange its assets for cash without it losing its value in a short period of time. Liquidity can impact the cash flow of a business. This is because a company can liquidate its assets to generate working capital in a situation where the business is experiencing a negative cash flow.

What is Working Capital?

This refers to the difference between a company's current/liquid assets and current liabilities. It is the amount of available capital that a business can use to finance its short-term expenses. The working capital ratio can be a measure of liquidity. The components of working capital include:

• Inventory: An inventory refers to the total amount of goods and products that a company has available for sale to earn a profit. It refers to goods, merchandise and materials

• Cash and cash equivalent:It refers to money in a physical form of currency that can be used to exchange goods and services

• Account receivable:This is the money due to a business from a customer for goods or services received that haven't been paid for.

• Account payable: This is a debt owed by a business to its suppliers for goods or services received on credit.

Managing Cash Flow in a business.

Developing a good cash flow strategy helps a business manage risks and continue running its operations smoothly. We know that some of the problems that cause negative cash flow in a business are associated with the working capital, for instance, a business can experience negative cash flow if it has money tied up in its account receivables. Also, if a business focuses on capital expenses and doesn't have enough inventory to put up for sale, there won't be enough working capital and this ultimately affects the business cash flow. One of the major ways to solve the cash flow problem caused by working capital is alternative financing.

What is Alternative Financing?

This refers to other forms, processes, and options of finances outside the traditional finance system (Banks and capital markets). Some of the most common types of alternative financing that help to increase cash flow in business include:

• Invoice Financing: This involves both invoice factoring and invoice discounting, where a business receives a cash advance from a financial institution using their invoice. 

Merchant Cash Advance: This involves providing funds to small businesses in exchange for an agreed percentage of the company's future income

Purchase order financing: This is an arrangement that provides working capital for businesses where they receive a cash advance from a third-party financier to fulfil a purchase order from their customers.

Some other alternate financing systems also include:

•Venture capital

Peer-to-peer loaning

•Term loans


Although a lot of these systems existed in the past, they were very bureaucratic and not easily obtainable as they were overseen by traditional banks. However, in this modern age, there are new systems in place that have been able to digitize alternative financing. This has made the whole process easier and more stress-free. It also involves less bureaucracy and access to working capital is quicker. A good example of an online alternative financing platform is Bridger.

What is Bridger?

Bridget is an online supply chain finance platform. One of our main goals at Bridger is to create an avenue where buyers and sellers never run out of cash by letting customers access unlimited working capital tied up in accounts receivable of the business. Bridger will pay up to 80% advance on invoices value from approved customers. Bridger also allows businesses to instantly send/receive payments locally and internationally.

Getting started on Bridger is very easy and stress-free. All you need to do with sign up by:

• Creating an account with your email address and a password

• Verify your business information for credibility and to reduce the risk of fraud

• Enjoy our services.

Want to find out more about Bridger and our services? Check us out here

Other ways to improve your business cash flow with modern-age solutions include:

•Digitizing payments i.e the use of electronic payment. This allows for easy transfer of money between buyer and seller. Some online payment platforms even carry out transactions without extra charges and it ultimately helps their users save money. 

•Accessing online loans: Rather than using the regular traditional bank loan, a business can access digital loans from different online financial institutions. A good example of a digital loan platform is Carbon. They offer loans without collateral. Their loans are easier to access than traditional loans. 

•Bringing your business online. The use of an online store. This allows customers to access your products at any time and anywhere. This opens a business to a wider range. 

•Going cashless. 

Subscribe to our newsletter

Thanks for joining our newsletter
Oops! Something went wrong while submitting the form.