Think Outside The Box: Managing Cash

Now For Something Useful About Cash

That’s Right, Ya Got Trouble…

Right Here in River City… 

With a Capital “T”, That Rhymes with “C”

And That Stands for CASH!!

“Cash is King”.  We have all heard this well-worn phrase but it is absolutely true.  Positive cash flow is the ‘water’, the life-blood of a company and without it a company will simply go out of business  (This means you will have to work for someone else).

The ‘Cash Conversion Cycle’ is the time it takes to convert a sale to cash.  Normally, a company must buy material, turn it into products, sell, ship, invoice, and then they get paid on ‘terms’.  So how in the heck did Dell Computer (which essentially has this model) achieve a Minus 15 daysCash Conversion Cycle???  That’s right, Dell is paid an average 15 daysprior to shipping their sales.  Simple: They focus on Cash, are creative, and think ‘Outside-the-Box’!

You too can focus on Cash, be creative, and think ‘Outside-the-Box’ and you will substantially improve your positive cash flow position.

Get Paid Faster (less $$ tied up in credit): 

  • Invoice your customers via email instantly starting the ‘clock’ on their due date and requiring a confirmation of receipt.
  • Get paid electronically via remote deposit, PayPal, etc.
  • Follow-up with customers prior to the invoice due date to ensure customer satisfaction and confirm (lock in) the payment date.
  • Initiate collection procedures as soon as invoices are overdue.

Reduce Inventory (freeing cash): 

  • Don’t order inventory until you absolutely need it (Use re-order points and minimum order quantities).
  • Secure inventory to prevent theft.
  • Get rid of obsolete inventory ASAP (It is tying up your Cash).
  • Use contract manufacturers where appropriate (Let them use their cash to hold the inventory).

Stretch Payments (conserving cash): 

  • Negotiate longer terms with your suppliers/vendors (Net 60 Anyone?).
  • Take all payment discounts (Doable with improved Cash).
  • Hold vendor bills until they are due (‘on receipt’ = Net 30).

There are many other actions that will help you convert that sale into cash faster.  Just focus on Cash, be creative, think ‘Outside-the-Box’  and the answers will start to appear because; Congratulations!  You are now Managing Cash!


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