Most of us in the business world have heard the phrases “cash is king” or “it is trash until it is cash.” Do you know the last time you or your management team critically examined the policies and procedures directly affecting the cash management cycle? If your answer is no, continue reading to learn a few tips to improve your company’s cash management.
One of the simplest ways of better managing cash flow is identifying and implementing policies and procedures aimed at shortening the operating cycle.
[ Operating cycle is the time it takes to obtain the order, manufacture the item, ship the item, invoice the customer and collect the receivable, therefore converting the sale to cash. ]
Management must work closely with the appropriate individuals to review each specific area. Questions to ask yourself:
- Are there ways to streamline the process of taking orders and getting them into the manufacturing schedule quicker?
- Once in the schedule, are there methods to reduce the time it takes to manufacture the item and have it shipped to the customer?
- Is there “low hanging fruit” in the areas of invoicing and collections?
- Are there areas we could automate to make accounts receivable management more efficient?
All of these areas significantly affect your company’s cash flow management. We recommend your management invest time in order to make these as efficient as possible.
Did you know? New technology has allowed many companies to complete the invoice process the same day or even before the product is shipped.
These are just a few simple ways to improve your company’s cash flow. If you would like to examine and quantify the potential benefits that your company can realize by shortening the operating cycle, contact us today!