CASH is King!
Three major elements of cash are you accounts receivable (AR), accounts payable (AP) and inventories. The idea is simple in terms of managing these aspects. You want to minimize AR and inventory and maximize AP. However, life is rarely textbook easy. As you look at the three areas below are you comfortable your business has robust processes in place to assure consistent handling of these key elements?
· How do you manage the terms of your customers?
· Collections and customer definition. Do you rank your customers?
· Pricing, do you consider the above?
· Freight and other tight term payables. Do you have consistent handling?
· Discounts for early payment. Are you set up to take advantage of this?
· Credits for returns (debit memos)
· Relationships must be balanced. Do your terms match the service?
· Raw versus Finished goods. Is this ratio analyzed regularly?
· Shelf stock and surge stock. Who owns this?
· Damage and obsolescence. Is it addressed promptly?
As a business owner, president or CEO what behaviors or systems do you have in place to assure sustained focus on your money (CASH)? Also, what are you doing in good times that will serve you well in tough ones? Not sure?
Do you apply these good practices at home or are you lax? Think about this if you have several checks in the drawer, they are of no value to you put them in your bank account (AR). If you pay the electrical company early do you think they will lower your rate? I would not count on that (AP). Do you have excess food, supplies or other items to return to the store (debit-memo)?
Ever see money laying on the floor of your teenager’s room for more than a day. Remember that feeling? Look to build that feeling about waste into your organization so your business has the fuel it needs to grow.
Expanding the possibilities and making business better! SPC Consulting can help you improve, contact us today.