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Cash Flow Management Is Critical Right Now, and Leasing Can Help

Cash flow management is important for businesses of all sizes, especially in an inflationary environment. With effective cash flow management, businesses should be able to understand and identify the levers they can pull to boost cash flow, cover ongoing expenses and grow. This article outlines why effective cash flow management is critical for businesses right now and how leasing can stabilise costs without sacrificing efficiency.

It’s time to review your cash flow management

According to Xero, over half of businesses are worried about how they are going to pay their bills. Whether a business is looking to cover its ongoing costs or invest in growth initiatives, cash flow management plays an important role. Understanding exactly what money flows in and out of the business and why helps financial decision-makers identify where changes should be made if cash flow is tight. For example, a large amount of capital can often be locked up in ageing inventory or unpaid invoices. Putting systems and processes in place to minimise the amount of capital locked up in these areas is essential to get right, as inventory management and receivables play an important role in boosting cash inflows.

Similarly, businesses should also consider their outflows, paying attention to fixed and variable expenses, capital expenditure, and operational expenditure. Spending some time reviewing a business’s costs provides a clear view of where the business may not receive an adequate return on its spending. Further, for variable expenses that are at risk of continuing to rise, looking for ways to fix these can provide more certainty over cash outflows.

Improving cash flow management is a benefit of leasing

Leasing assets is an effective way for businesses to improve their cash flow management without sacrificing working capital. Instead of purchasing assets upfront using working capital or taking on debt with variable rates, leasing allows businesses to access the technology and equipment they need with fixed repayments for the entire lease term. The lease term will depend on the asset required and specific financing arrangements. And if a company already has assets it owns that they are looking to replace, a full-service asset finance and leasing provider should be able to buyback the assets and decommission and dispose of or recycle them responsibly, providing an extra cash injection to the business.

Beyond the stable repayments that come with leasing assets, pairing it with a lease management and accounting system, such as Quadrent’s LOIS, also provides companies with valuable data. This data not only enables companies to efficiently report on their leases and make IFRS 16 compliance simple and easy, but it also provides insight into the return on investment (ROI) for leasing. This is particularly important as the cost of capital increases for companies. Stabilising the cost of capital through leasing provides assurance and, over time, builds data that can be analysed for insights to drive stronger commercial decision-making.

Stabilise your cash flow and get access to better technology with Quadrent

Understanding a company’s cash inflows and outflows provides essential insight into what changes financial decision-makers can implement to improve cash flow. Not only is boosting cash flow through optimal inventory and invoice management important, but looking for ways to optimise and stabilise costs without sacrificing efficiency or working capital is critical in an inflationary environment. Leasing assets is a smart way to stabilise costs by fixing the cost of capital across an entire lease term. Not only does this drive more effective cash flow management, but leasing can provide long-term strategic benefits, too, including data insights, improved staff retention, and clear visibility over the ROI on a company’s assets.

Quadrent works with organisations helping them access assets without sacrificing cash flow and addressing their ESG risk in the process. With a team that has in-depth leasing knowledge and specialised accounting backgrounds, we’ll help your business weather tough economic conditions, get the most value out of your assets and address growing ESG requirements and reporting expectations. 

Proactively manage your cash flow in a challenging economic environment with Quadrent. Click here for more information.