How To Effectively Control Enterprise Cash Flow

At present, in the third wave of the strategic pformation of Chinese enterprises, enterprises are mainly through horizontal mergers, in order to occupy more market share, but mergers and acquisitions are not easy for enterprises, and a little carelessness is likely to fall into financial black holes.

Obviously, it is very important for enterprises to control cash flow.

The investment strategy of Li Jiacheng and Guo Guangchang is based on ensuring good cash flow.

The purpose of cash management is to save cash and reduce cash holdings while ensuring the cash needed for production and operation activities, and use idle cash to invest in order to obtain more investment returns.

In other words, enterprises should seek a balance between reducing risk and increasing profits to determine the best cash flow.

So, how can we control the cash flow of enterprises? One of the basic principles is that we must have stable income first.

If there is no steady income, managing cash will be impossible.

How can we get a steady income? The steady income is started from the risk reduction. In this regard, Li Jiacheng's investment strategy is a good example.

Different business of return on investment

Li Jiacheng's idea is that different businesses have different payback periods and are sensitive to the current economic situation.

Usually, short term business is more sensitive to the current economic situation. The advantage of these businesses is that when the economy is good, we should seize the opportunity to get more lucrative profits, and the cash flow is also continuous, such as retail and hotel.

Generally, the long term business is less affected by the current economic situation. The advantages of these businesses are income stability, but capital investment is huge, such as infrastructure and electricity.

If the company's business is mostly short return business, the fluctuation of earnings will be very large.

If a company's business is mostly a long payback period, capital return will be slow, and because capital investment is huge, it is prone to the risk of inflow of funds.

The best thing is to combine the business of different return periods to achieve the risk diversification in the return period.

There are different payback periods for the different businesses of the "Chang He Department", which ensures that sufficient funds are refunded for each period of time to finance the long term return business.

Through the acquisition of stable return business, it can also reduce the fluctuation of earnings, so as to achieve the smooth profit effect.

In addition, the stable return project has its strategic side, for example, it can provide stable cash flow, help other business development in the group, and it can reduce the chance of financial or financial difficulties when facing difficulties.

Businesses investing in different regions

Moreover, in order to obtain a stable investment income, in Li Jiacheng's investment strategy arrangement, he adopted different ways to invest in different regions and the same business.

For example, "Hutchison Whampoa" container terminal business: after the establishment of "Huang Huang" in 1977, container terminal has always been the highlight of its business development.

From the beginning of the 90s of the last century, the business began to expand abroad.

In 1991, the Group acquired Felix Du, the busiest port in the UK, taking the first step in global expansion.

Over the next few years, "Huang Huang" has expanded its container terminal business to different strategic locations across the globe, including 15 countries and regions in China, Southeast Asia, the Middle East, Africa, Europe and the Americas.

At present, "Huang Huang" operates 30 ports in the world with a total of 169 berths.

According to the annual report of "1995-2001 years", the revenue of container terminal business has been increasing steadily in recent years.

The main reason for the steady growth of the total revenue of container terminal business is that its port business is dispersed in different regions. No matter what economic environment the group faces, the ports are affected differently.

Therefore, in different periods, regions with good performance and fast growth of profits can often support areas with relatively poor performance, slow growth or even negative growth, so that the overall profit of wharf business will always maintain a positive growth.

Investment by means of capital increase

Li Jiacheng's investment is exemplary, and some domestic enterprises are also worth learning. Fosun Group is an example.

In recent years, Guo Guangchang and his "Fosun Galaxy" have revealed the most imaginative mode of operation: joining the industry integration. The company's investment and acquisition scope covers bio pharmaceuticals, real estate, information industry, commerce and circulation, finance, iron and steel, automobile and other fields, and more than 100 companies directly and indirectly hold shares.

The core of Fosun's investment is the balance of cash flow.

How does Fosun control cash flow? "We advocate increasing capital and not advocating pfer, because the cash flow of capital increase is in our system."

Wang Qunbin, general manager of Fuxing industry, said.

In 2003, the huge takeover of "Fosun", "Nangang shares" (600282), reflected its superb skills in manipulating cash flow.

The acquisition is simple, that is, the emergence of Fosun gold, Nangang group assets, the two sides set up a joint venture, from Fosun holdings.

Then, through the increase of capital, the joint venture company acquired "Nangang shares".

After this arrangement, the acquisition fund is still in the hands of Fosun.

In order to ease the pressure of investment, Fosun has two steps: "first set up, then increase capital".

In the first step, Fuxing three affiliated companies invested 600 million yuan in cash, and Nangang Group invested 400 million yuan in some operating assets, and set up a joint venture "Nangang joint".

The second step is to increase capital by the same proportion. Fuxing still increases its capital by cash, while Nangang group increases its shareholding by "Nansteel shares".

Investment by holding mode

In addition to advocating the increase in capital acquisition, Fosun also has a claim that it is holding.

Take the acquisition of Nangang as an example: Nangang group needs to be approved by the government with the increase of its shares.

The time needed for examination and approval, and the start-up of a joint venture has been controlled by Fosun, so the cash needed for the second step increase of Fosun can be realized through various financing arrangements.

In addition, according to the joint venture agreement, in order to increase the acquisition of the "Nangang joint", Fosun needs to pay 210 million yuan in advance.

Coupled with the 600 million yuan of funds set up in advance of the joint venture, Fosun has invested 810 million yuan to achieve the purpose of acquisition, and as a controlling shareholder, the 810 million yuan is still under the control of Fosun.

The final registered capital of the joint venture company is 2 billion 750 million yuan, and the 60% of the 2 billion 750 million yuan is 1 billion 650 million yuan.

In this way, a joint venture project with a total investment of 1 billion 650 million yuan can be realized only under the initial arrangement of 810 million yuan under the ingenious arrangement.

If we follow the conventional way of thinking, we usually buy 60% of the shares of Nangang shares directly, and if we calculate the net assets data of the Nangang shares at the end of 2002 by 1 billion 742 million 530 thousand yuan, that means that there will be more than 1 billion yuan of cash to go out of Fosun Group immediately.

Moreover, the balance of money at the end of 2002 was 900 million yuan.

This greatly reduced the financing pressure of Fosun, because Fuxing Group's monetary fund balance at the end of 2002 was only 1 billion 200 million yuan.

Industry strategy for cash flow

As mentioned earlier, cash flow in retail and hotel industries is relatively continuous. It is also a good choice for investment. Specifically, this is the industry strategy to control cash flow.

In recent years, a number of powerful big business investment circulation industry is directed at cash flow.

Liu Yonghao, President of the new hope group, admitted that one of the reasons for the new hope to enter the circulation industry is that the retail industry has continuous cash flow.

Moreover, in the strategic layout of Fosun industry, commercial circulation is also of great strategic importance to Fosun. The Lianhua supermarket and Yu Garden shopping mall under Fuxing have a chain drugstore across the country, with a retail sales of 20 billion. According to domestic practice, there are at least 3 to 4 months' time, and about 6 billion of the suppliers' funds can be postponed.

In addition, there are also special industries and abundant cash flows, such as tourism.

Delong took tourism as its leading industry. Apart from the rich tourism resources in Xinjiang, it is optimistic about the operation mode of tourism.

As a chief executive of Deron said, "the biggest reason for Delong's entry into the travel industry is that the profit model of this industry is different from any other industry.

Other industries are investing first and then collecting money, while travel agencies organize domestic and foreign tourism businesses to collect money first and then do things.

Such a poor time to fund can provide a broad space for the operation of enterprises.