If you could only do one thing to improve cash flow, what would it be?
Business Coach & Trainer for Sustainable Success | Purchasing Solutions | LION | 1800+ Contacts | [email protected]
I posed this question to the Chief Financial (CFO) Network on LinkedIn. Below are their responses. Hopefully their expertise will help you improve your cash flow.
José Zulmar-Gerente Financeiro //Finance Manager// CFO Gerente Financeiro// Finance Manager // CFO // Director, Top ContributorRoy,
There´s no magic formula: sell more and well.The faster a seller moves goods to a buyer, the faster the buyer will pay for those goods, and that impacts cash flow. Therefore, businesses must ask themselves how they can better improve the speed at which their goods exchange hands. And this goes well beyond the actual transportation of the goods. Rather, it requires an examination of the entire process–from sales all the way through invoicing.
Pierre C. Miron Company management and FinancingRoy,
I believe that, both comments from Mrs. Foteini and Mr. Zulmar Lopez, are very accurate. It all depends on how fast you need to improve your cash flow. On a short term push collection and stretch payables. If it is a mid-term issue Mr. Zulmar Lopes solution should be put in place. And I would recommend in the examination process to look at the turn around time of your inventory. Do you need all that inventory on shelves.
Seraphim TsoutsosConsultant – Looking for new opportunitiesI’d check (trend) my CA indices as well as the debt burden each CA item carries (currently). Then it’d be obvious where to focus.
AJ MinnetianSenior Director – Technology Finance l Strategy l Accounting l Business Development ProfessionalThe classic way to do it in the near term is to stretch the balance sheet, lengthen your AP days, and shorten your AR days. Easier said than done!
Obviously, this will only have a short term effect, you ultimately want to increase your net income by improving revenues, less so lowering costs.
Jim Smith CEO, Enterprise Management Group | Enterprise Wide Expense Reduction | Profit Improvement Reduce operating expenses in a sane and employee involved process. It is not possible for a company to to not have needless costs. Things get initiated for one valid reason or another then go on auto-pilot, become part of the culture and no one bothers looking at it again. If they do, it’s usually part of a bigger enterprise wide initiative and everyone, to be fair, gets the same objective, the same percent.
That makes absolutely no sense, but it is the most frequent approach. What happens when a CEO takes this approach, high value departments get penalized with, the say a10% cut, while low value departments are rewarded with being allowed to keep 90%, all in the name of fairness.
Sometime ago I averaged the net margin of the ten largest Fortune companies. It was 6%. So if you’re trying to impact cash flow, it takes $17 of incremental sales to drive $1 to the bottom line and $1 of expense reduction to drive $1 do the bottom line. Seems pretty obvious. if you can do it.
We typically generate a sustainable 10% SG&A reduction, regardless of what has occurred just prior and the percentages per department are all over the scale. One hundred percent of the savings are the result of employee input occurring as soon as we have suspended the company’s culture, politics and silos and it’s all done in ten weeks. One example: a sustainable $300 million SG&A reduction, a $200 million reduction to already approved capita and a one-time inventory reduction of $45 million. All in ten weeks.
Go for the expense reduction, which will occur far quicker than any revenue ramp up.
Alex C. Leung, CPA, CA Performance Management ProfessionalA company’s industry and business environment / competitive landscape dictate what options are available to increase cash flows. That said, dare I potentially bare the wrath of a frenzy of thumbs down and suggest:
Pay AP sooner to take advantage of supplier discounts where offered for early payment. Real cash flows potentially gained, real cost savings, and happier suppliers who can help you make happier customers and potentially faster cash receipts.
José Zulmar-Gerente Financeiro //Finance Manager// CFO Gerente Financeiro// Finance Manager // CFO // DiretorTop ContributorI´d would add.If improving cash flow is a priority, make sure all of your employees understand that. Remember that your employees will be motivated by the targets you set for them.
Obviously, collectors should have collection targets. But even your sales staff should be on board. If a salesperson only has a revenue goal, he or she will work to meet it, regardless of whether the invoices are paid on time or in full. Instead, institute a policy where, if something is written off, the revenue is backed out of commissions.
If employees have a target, that’s what they focus on.
Bob Raffo, Jr.CFO at PSKWIf I were to focus on one thing only it would be the quality of my customer. Everything else is a short term solution. Make sure your customers are credit worthy – timely payers – financially secure. That is a long term strategy to positive cash flow.
José Zulmar-Gerente Financeiro //Finance Manager// CFO Gerente Financeiro// Finance Manager // CFO // DiretorTop ContributorYour most important customers are not those that generate the most revenue but those that can unlock the most value in your business.
Jose Aristondo Maruri Director Financiero Subdirector GeneralExcellence in debt collection.
Bill Milewski Global CFO / Finance Director – Relocating to Washington, DCTop ContributorDebt issues begin BEFORE anything is sold. It’s a 360 view of managing your business.
Sr Manager Group Finance at ARASCORoy,
My advice is to create a product within your product mix that is sold on a cash basis only. The revenue streams from this product would provide a great cash flow to finance other products that your company sells on a credit basis.
Fidelis Muia Director of Financial OperationsTop ContributorI will be glad to get your views on how to improve cash flows from a not for profit point of view.
|Ammar Khadim Chief Financial Officer at WMO|
An interesting discussion as, in most of the cases, the main reason of business failure is poor cash flow management. In short term, simply try to reduce receivable days and increase payable days.
Fidelis Muia Director of Financial OperationsTop ContributorAnalyze which of these two components (receivables and payables) mostly affect your cash flow.
Roy Austin, CPA, CMA, MBA Business Coach & Trainer for Sustainable Success | Purchasing Solutions | LION | 1800+ Contacts | [email protected]Top ContributorThanks to all of you for your responses. Now let me rephrase the question. Long Term, what is the most important thing a small business owner could do to improve cash flow.
Howard Mulcahey Vice President and Chief Operating Officer at Forensic Economics, Inc.Excellence in the revenue cycle: solid sales with the expectation of prompt payment; lots of attention to the sale until and after it is paid; effective collections; stretching AP but stretching expectations during procurement; and making all of that part of that daily operating mindset. No small task.
Lee McLendon,CPA,CGMA CFOFidelis Muia requested suggestions from not for profit view. I have been in both environments and there really is no difference. You still have to manage cost, collect accounts and manage payables. Because of focus on bottom line, the level of intensity of the issues may be lessened in the not for profit environment but the principles remain the same.
Thomas Della Franco Chief Financial OfficerMost beneficial, long term impact always involves inventory management and turns reductions, together with laser focus reduction of E&O balances. Unfortunately, this is also a difficult area to yield immediate results. The real skill is in developing optimal stock levels and turns to satisfy demand, while understanding and focused management of historic root causes of E&O.
Janine Meira S. Koppe Eiriz Finance Manager – FP&A, Treasury and Finance Project Management at CameronI learned from experience that it is good to make everyone aware of how they are affected and can influence cash flow generation – and in communicating with all the enterprise we cannot be restricted to our finance jargon with terms that are so far away from everyone else´s day-to-day work in operations, sales, HR, IT… each employee has their share and they should know what it is in their own “language”…. While having someone trying to grasp the DSO concept in a chart I had a quick turnaround by saying: this is how long it takes us to get the cash in our pocket to reward everyone´s effort… he smiled and eversince became a great contributor to improve collections!
Kumar M Intern at Varma & Varma, Chartered AccountantsShort Term Plan:
(a) Reduce the AR period. Negotiate and re-negotiate with the debtors that may go bad to recover as much as possible.
(b) Optimize the payments to creditors so that you retain their confidence.
(c) Offer discounts on non-moving goods.
(d) Strict control on Inventory replenishment and reorder with respect to Quantity and Time
Long Term Plan:
Note: The question asks to mention only one thing. But, I mentioned quite few things here. I am sure most of you would agree with me if I say, they are interrelated and the action to be taken depends on the type of industry/environment that the company is operating in.
Jeremy Slaughter Client Partner and Principal at Tikvah GroupThere are a lot of great things listed in these posts and all can help cash flow in some scenario. I think it might be challenging to assume all businesses can improve cash flow by doing the same “one” thing. I work with a company that produces revenue in the neighborhood of $50M/yr and they have no receivables, no inventory and no products of their own to sell. While all the actions listed above are absolutely capable of improving cash flow this company isn’t impacted by them. Their best controllable expense is labor and travel as they are a rep agency for other companies and their revenue mix is most impacted by the terms of each manufacturer and the markets in which they represent companies. I mention this not as the “one” way, but to say every company at any given time can be different so diligence and awareness are imperative in determining the best action each company can take to improve their respective cash flow.
Roy Austin, CPA, CMA, MBA Business Coach & Trainer for Sustainable Success | Purchasing Solutions | LION | 1800+ Contacts | [email protected]Top ContributorLet me shift gears a little. For small businesses, what are the most important things they can do to improve cash flow. While the basics of cash flow improvement are universal the dynamics and resources of small businesses are different that for large companies.
Bob Raffo, Jr.CFO at PSKWA small business needs to do the following:
1. Develop reliable and accurate financial statements – not a 10K but at least a P&L, Balance Sheet and Margin Analysis. Produce these reports monthly and manage the business by the numbers.
2. Establish a line of credit – no matter how small. Use it and build it and make sure you have access to funds to help support growth.
3. Understand ROI – if you are going to spend money on advertising – how will it drive revenue. If you are going to buy equipment – how will it lower your costs to improve margin – etc.
4. Most importantly – Sell. Sell. Sell.
David Zaleski Chief Financial OfficerI think it all starts with education – educate all employees on cash flow importance and then let your entire company help with ideas. Integrate it into the culture, the company metrics, the bonus plan, etc. Make it everyone’s business, keeping it out in front and it will develop quickly. But you as CFO must walk the talk and be visible in the process and just as importantly, you must get the CEO on board.
Mark McLaren Innovative Financial ConsultantBuild or provide a top quality product and support it. There are very few business who do this to any significant degree anymore, but when it is done, it provides a long tail of profitability and cash flow. Too much energy is wasted on beefing up short term CF.
Costco is an excellent example of this. Wall Street always pushed for higher margins from Costco, but Costco pushed back. Costco is much more profitable because they operate this way. Happy customers produce repeat sales which, in turn, bolsters long term CF’s. Cable companies’ major focus is ST CF. How satisfied are their customers?
While I am an accounting and finance person, you never want the cart before the horse!
Robert S Meybohm Results Driven ExecutiveI must not understand the question? If you want to deal with cash flow over a long period of time take a look at the cash flow statement and see what the largest positive numbers are on the statement; likewise look at the negative numbers. What can you do to make the positives go bigger? Seems to me, the answer is typically tied in to running a larger organization (sales growth ), while not experiencing leakage in profits or efficiency (i.e, DSO, inv turnover turnover ratios).
Ronald Raadsen, M.B.A. Accountant | Consultant | Looking For New OpportunitiesIf there is only one thing, then it is a complete understanding of the cash flow cycle of the organization. It is understanding where the money is going, where it is coming from, all the internal controls to safeguard cash, how quickly customers are paying their debts, the time frame for paying invoices.
There is an inherent with the premise of discussion, there are too many factors that can suddenly explode to cause a hemorrhage. It’s like a doctor during a physical, he looks at everything.
|Abhishek Choudhary CPA (USA), CA(I)Corporate Controller: Financial & Accounting Management, Budget, Debt & Project Funding, Restructuring, Tax Planning|
Cash flow improvement efforts could be an industry specific or specific to a particular organization. Though there are general points to focus,
a. Understand clearly Cash flow items (both Inflows and outflows), as only those items will be the players
b. A simple approach has been to reduce deferred collection, and rather offer reasonable discount for the cash transactions, as anyway external borrowing cost is normally higher than these discount; and these discount could be offer as marketing promotion to serve dual objectives
c. A cash reserve helps in several respect, e.g. Grabbing a cash deal, M&A, Stock prices, Attracting better human resources
d. At the same time, Cash outflows management can also contribute in improving Cash flow, e.g. Corporate account with Vendors, Longer terms (60-90 days) with bulk orders, Terms negotiation/renegotiation
e. CAPEX can be a major item in Cash flow, and this outflow could be reduced by opting other alternatives such as Capital leasing, Financing, Lease cum buy option or sometime operating lease
f. It is most important than anything else that business is growing, company’s customer retention is good and always focus on new acquisition (customers)
g. Alternatively, these programs could be considered for a specific situations, e.g. Factoring (for over 30 days AR), AP/Merchant financing (in case of cash or lower vendor terms), Private label CC (GE Capital program- in case of repetitive customers), Line of Credit (on AR &/or Inventory)
|Joe Kirby Chief Financial Officer at NorthPoint Health & Wellness Center|
We run a human services non profit and are driven mainly by contracts along with some fee for service revenue. For us, looking at CF over a two year period of time helps us to focus on what we need to accomplish now in order to stabilize CF in the longer term. So, for me, adjusting everyone’s mindset to think more strategically and prepare now for tomorrow is important.
James Wade, Director of Finance Finance leader who partners with business leaders to deliver ‘the story’ behind the numbers.If it’s one thing, then it has to be about Revenue. Sales must drive the equation.
Richard Taylor Controller at Lomax ConstructionMy “one thing” would be to understand the costs of the products/services being sold are, in fact, sold at a profit.
Kelly Parker Vice President at R.T. Beers and CompanyHigh company morale. You can build the best product and have superb sales; however, if company morale is low it will lead to high turn-over, employee injury claims, and low productivity. Keep the employees happy, keeps the business viable. How much does it cost to train an employee, an insurance claim, or a large lawsuit? A happy employee can safeguard against those and not put the businesses assets in jeopardy. Which in turn, leads to long-term cash flow. More coming in-and less going out.
Mark McLaren Innovative Financial ConsultantKelly, What you described is the perfect description of the Costco model. Every single time I go to Costco, I find the employees helpful and cheerful. I think you are right on. Focusing on the financials first will always be a bad long term solution to LT cash flow. After seeing the deluge of people at Costco, getting the service I liked and getting high quality merchandise for a good price (Peter Lynch method), I investigated the financials. Good as well. Additionally, Charlie Munger sits on their board and Charlie is Warren Buffet’s right hand man. So…steady as she goes. I bought the stock over the 2008 to 2010 time period. Glad I did!
|Javier Egozcue, MBA, CPA, CGMA Internal Audit Manager|
Great question with lots of different possible correct answers! First we need to narrow a bit…
1) Understand your company costs structure and business cycle.
1)+2)+3) = The famous Cash Conversion Cycle
Other key matters are:
If a company can manage these key areas I would say the LT cash flow will be healthy. Obviously these are general measures that could be applied to a business in almost any industry. Also, this is only the numerical side of the equation…we also need to factor in an important ingredient…employee teamwork, dedication an commitment to succeed from top to bottom.
Mark Wagstaff Vice President of Finance at Connecticut Lighting CentersFor long term cash flow improvement it essential that a coherent sales strategy needs to be implemented to grow sales within the territories/markets and expand into new markets and/or new product lines. Everything else (cutting expenses, etc.) is short term.
Warren Huang, Ph.D 5500+ Global strategy integration: Big data, economics , capital market, value chain , technology, trade innovation Founder.Process/product/technology/maraket innovation increse revenue, profit margin growth and cash flow.
Mary M. Bodajlo Finance Column Editor of an International web at Great New YorkListed imminent “Ali Baba,” Why can produce beautiful results? Its recipe for success. . .
This Chinese electricity supplier giant said Wednesday, June 30 at the end of the quarter, the company’s profits almost tripled, reaching $ 2 billion (about 12.3 billion yuan). Given its total revenue of $ 2.5 billion, indicating profit margin reached a startling 80 percent. With less than a month before its initial public offering, Alibaba Group intends to show just how profitable – why? How? He focused on mobile – simply – to seize the market.
I think, no matter how kind you are big or small business, you still need to understand the market, in order to win the market and your customers’ needs, to set up your merchandise at competitive market, with business, with the guarantee of cash nature .
Edmund Mabuti CASH IS KING. I USED TO BE A VP-FINANCE & ADMIN OF ABB PHILIPPINES, AND I CONSIDER ABB AS AN INSTITUTE WITH LOTS OF REGULAR SENIOR MANAGEMENT MEETINGS AND WORKSHOPS ON HOW TO KEEP A HEALTH CASH BOTTOMLINE FOR THE LONG-TERM. AS A CFO, YOU HAVE TO DRIVE THE BEST POSSIBLE WORKING CAPITAL MANAGEMENT AND BE READY WHICH COST COULD BE FREEZED WHEN YOU FORSEE SOMETHING WILL AFFECT YOUR COMPANY’S CASH POSITION.
Mark Spicer GM Finance | Driving powerful business capabilities | NOW AVAILABLERoy, if it has to be one thing, establish and maintain well thought out, well documented processes. Everything stands (or falls) on them. “well thought out” means effective, efficient and scalable.
Kok-Poo [KP] LOW Senior Finance Manager, BDO LLP Group – SingaporeBasically, all matters in business created by human beings so motivating employees working happily with commitment to the company vision which will in turn lead to long-term cash flow stability & business sustainability.
jason wang Vice Persident at MDT InfoTech LtdAdjust or change business model is working for your long term cash flow problem.
Poul Erik Kamstrup Global Finance ExecutiveIn a B2B context:
1. Know where you want to position yourself in the market.
2. Have a value adding product/service offering that matches your positioning. Be able to adapt quickly to market requirements.
3. Work on continuously improving the supply chain in close collaboration with customers and suppliers to eliminate waste.
4. The better brand recognition/customer loyalty, the better share of sustainable cash flow your company gets.
Susan Wilson DirectorThe most important thing you can do to improve cash flow
Going back to the basics
1. Review your Terms of Business.
George Habib Deputy Financial Controller at Azur TravelThe most important thing is Sales information
Examining the data from the sales staff on a regular basis. How much was sold yesterday, how much will be sold today, and what about tomorrow? The more accurate this information, the tighter the inventory. And the tighter the inventory, the better the cash flow.
Filipe Moura Assistant Vice President, Financial Services Manager / People’s United BankKeep your fixed costs low!
|Shafiq Ebrahimjee Chief Finance Officer|
It varies from industry to industry. Cash flow management is linked to customer/creditor support too. The relationship that will exist between yourselves and the creditors will determine how much reasonable time you can obtain in addition to normal (30/60 days) period. This is of course a plus to all the other points mentioned above earlier.
Kirk Abriola, CPA Senior Finance Professional with Top Secret Clearance Seeking New OpportunitiesExecute to your companies strategic plan which includes cash flow expectations. If this does not exit, may want to start here.
Greg Thorne C.F.O at Tom Lange CompanyRelationships with customers and suppliers is key . When your customers are tight on cash they will generally prioritize available cash amongst their suppliers . You want to make sure that you feature high on , or at the top of that list . The type of service / product you provide obviously influences this but so does having a solid relationship with your customer . Similarly with your own suppliers , good relationships lend themselves to suppliers being more flexible on payment terms to them.
venkataramanan Thiru Practicing company secretary My earlier comment is not appearing.
Kelly G. Peters, CPA, CMA Director, Compliance, Land and Armaments Sector at BAE SystemsThe biggest opportunity for improved cash flow is often inventory. Improving inventory turns, while maintaining days receivables, will often bring significant, long term cash flow benefits to the company. These strategies often require partnering with your suppliers for co-investment in product development and holding inventory on their books, being able to implement JIT, attacking waste, etc.
Another model is selling your suppliers goods through your web-site, taking a commission on the sales (I believe this is the Ebay and Amazon models).
Henrique Pezzutti Ribeiro Teixeira Financial Market Professional“Natural Hedge” is the most efficient way to manage your exposures, investing time to balance your AR and AP in the long term.
Adam Ryan Seeking VP of Finance Role – Global Financial Professional, Turn Around Specialist, Strategic Planning, FP&AYou need to asked some basic questions about your business before you can determine a long term cash flow planning:
1) How much will your sales grow over the next five years and what will are affect on profit margins
2) How long does it take to collect your outstanding A/R and what could cause collection problems
3) What are the capital expenditures over the next five plus years
4) How much is the company’s head count going to change over the period that your planning for on the cash forecast, what are the benefits costs and changes in wages plus bonuses
5) What are the impact of variables, raw materials, delivery, electric, and others
6) The costs of banking like interest, lending cost and other financing costs
When you have answered these basic points list above then you are in a position to project your cash requirements long term.
All this work can become worthless in a moment if there significant economic changes within business or the economy.
Long term cash forecast are good to plan but difficult to control over extended periods.
Brian Awuor Management Accountant at Mabati Rolling MillsHi Roy, in my opinion in the long run cashflow and profitability are one and the same. In order to improve cashflow in the long run a company needs to maximize the efficiency at which it generates revenue from every shilling (dollar/pound/euro/yen/yuan/dinar/etc) invested. Also, the company needs to reduce the payouts it makes that do not have a direct or indirect effect on the inflow of revenue and work on having a reasonable debt appetite.
Florita Benemerito Business & Finance Manager at Caresharing, Inc.Improving cash flow Long term – regardless of what type of business you are in-the Dynamics of Cash Flow Management should not rest only with a specified department within the company but rather all the major players of the company should be involved for their COMMITMENT AND their sense of OWNERSHIP(as trusted management of the company). So all the proposed cash flow budgeting controls shall be properly downloaded and implemented company wide even to the lowest rank. Meaning each major players within the company should have an awareness of the importance of each role for the survival of the company which would translate to a continued employment and happiness to both the investors and the employees -as well as as its positive effect towards continued business with the external partners-Customers, suppliers, etc. With this scenario, planning and implementing controls for a Long Term Cash Flow management would become easier not only for the CFO/Director in charge but also in getting the approval of the company stakeholder to infuse more investment and looking positively towards a long and positive prosperous business ahead.
Joserico Martínez Shaklee MéxicoCash is the result of CAPEX activities into the organization. There is not a formula since this depends of each industry, nevertheless the good policies will determine the correct way to have a good administration. Remember that: If this Company were my own business, I really would be taking the best decision?
Melissa Miller Director of Financial Services at FirestoneBeing able to capture the data necessary to track and adjust inventory turns, expenses, receivables, etc. is the key to having what any CFO needs to adjust and address areas of concern. Absent sound data we are relying on only judgment which may or my not be accurate.
Luiz Felipe Mascarenhas Senior Manager FP&A at World Fuel ServicesGood stuff! Another point to be consider is the gap between the sales forecast and the real sales. The sales forecast drives a lot of activities in our business, like diesel supply. We have to pay in advance for selling after. If we don’t sell, it will turns in inventory.
Arturo Carbonell Senior Finance PRGNot always easy, however, wherever possible making use of deposit payments. 50% up front fees, securing prices for customers especially where volatility exists. There are potentially vat implications as this would not be due until final invoice is raised, making this more attractive.
Dan Hansen CPO | Director Group Procurement, Sourcing, Category, contract, Finance, logistic, Tax & ITAbove is all levers – and good levers – but having executed 3 global Cash flow programs, then I learned that the key driver is
TRANSPERANCY: Create insight in where you REALLY are, and where you REALLY are heading
OPERATIONAL COMPLIANCE: Its all about working on the same agreements and compliance. (Example Using PO does not help, if PO is not aligned with Commercial contracts).
So the easy and fast view
JELILI ADEWALE ADEYANJU Group Head of Account at Computer Warehouse group Plc (CWG)first integrate the ideal in all staff
secondly, encourage advance payment from customers
thirdly, negotiate a better payment term with the supplier
lastly, ensure the deal is profitable
|Victor Mamtora♦ Financial Controller ♦ Improving Internal Controls ♦ Streamlining Processes ♦ Managing a Finance Department ♦|
Pick whichever ONE suits your needs:
Warren Huang, Ph.D 5500+ Global strategy integration: Big data, economics , capital market, value chain , technology, trade innovation Founder.Process/product/technology/maretk innovation increas profit margin through high value added product up grade.
Retief Ueckermann Chief Financial Officer at Cape Gate Fence & Wire Works (Pty) LtdTeach everybody in the organisation the following:
Sale is vanity
profit is sanity
cash is reality
Susan Korath, CCIM CFO at Tulfra Realty II, LLCMost important – control and monitor costs. No matter how successful a company may be in increasing its revenue, if its costs are not tightly controlled, then it’s analogous to a pocket with holes.
Dan Hansen CPO | Director Group Procurement, Sourcing, Category, contract, Finance, logistic, Tax & IT…Add to my previous input.
Update all Suppliers to Minimum 90 Days (where legal possible)
Reques maximum 30 days from Customer (Where the Power game allows)
Implement Supplier Financing model
Establish “One Planing” function – across all sites.
Ensure a good match btw production material needs and supplier delivery time (there is no need to have 3-10 days stock, if you supplier can deliver in 2-3 Hours (so Adjust you Max/Min control active with your supplier delivery possibility)
Implement reversed Supplier planing (Strategic suppliers, have access to your planing – they will be responsible for you have “Just in time” delivery.
Monitor payment run (automatic block all early payments)
Ensure that you finance system is adjusted to your actuall terms (not standard terms)
Hire a Cash flow director – give Him/Her the mandate to act
David Baker, C.P.A.VP & Chief Financial Officer Peerless Pump Company at GRUNDFOS Holding A/SProfitable revenue growth is the single most important thing for long term improvement:
1. Seek margin improvement by exploiting sales niches with tactical price increases.
2. Review variable and fixed cost components by revenue stream to uncover incremental sales opportunities for products with available capacity.
3. Use the information from #1 and #2 and target a 10 day improvement in the complete revenue cycle by a combination of improving collections and pushing out supplier payments.
4. Look for resource sucking customers to fire. e.g. Pareto chart customers by cost of quality, billing disputes, collection issues etc.
Gidi Bachar Business oriented Finance Manager with strong accounting skillsWhat I’m usually trying to make sure to improve long term cash flow is to shorten customer payments and extend supllier’s. It’s very basic buy crucial .
However , one should bear in mind that there is a lot of education behind it , vs. the company’s customers and vs. suppliers as well.
On top of that , the specific market environment that the company operate in will effect it as well.