Watch your Organisation’s Oxygen (Cash-flow) closely unless you want it to be put on ventilator !!!
“Managed Money works harder, goes further and accomplishes more than spending the money without a plan”
— Sandra Simmons
In the pursuit of expanding business and increasing turnover, the tendency is to neglect cash-flow. In simple words, Cash-flow is made of Receipts and Payments of money.
1. Sales & Receivables
We all know interest-free cash-flow comes from sales / billings. If the Organisation wants to stand on its own, its billing cycle must be wrong. All the delivery of goods and services must be billed. In short, anything which moves out from my organisation which make me eligible to raise an invoice, must be billed so that claim can be made from customers for collection.
But what’s the use of Receivables (Debtors) if it can’t meet the monthly expenses of the organisation? Therefore, there must be close & regular follow-up of receivables. Ensure:
- Whether the Customer has received the goods / services?
- Whether there are any quality issues resulting in deductions at a later stage?
- Whether the Customer has received the invoice (many-a-time invoice gets absorbed at client’s ocean because it was not addressed to the right person)?
- The reasons for non-payment of dues after due date and next due date
Unless the money gets realized from the customers, the organisation has to look for alternative means of generating cash-flow, which may be interest-bearing.
2. Expenses and Advances to Suppliers / Vendors
Similar to sales, expenses and advances to suppliers require equal monitoring. Therefore, inquire:
- Whether goods and services are purchased at competitive rates? Look for alternatives which provide better quality, price and delivery. Cost, quality and delivery are three important benchmarks to evaluate the vendors / suppliers.
- Whether bargain for better price, terms & conditions has been done where advance given to them?
“Happiness is a positive Cash-flow”