Does your business need cash in the form of new loans or investment? Perhaps the answer is yes. But there may be cash hidden on the balance sheet in your company under different names.
Consider the following:
- Accounts Receivable Turnover. How long does it take on average to collect outstanding receivables? A reduction in the outstanding receivables can make a dramatic impact on the need for operating finance, and on your ability to grow the business without incurring additional debt.
How soon after a sales event is your customer invoiced? If you wait, collection will take even longer both because of the additional time and because you are sending a message that collection is not important.
- Bad Debts. Are you writing off too many accounts? Are checking the credit on new accounts and following up on changes in creditworthiness of existing accounts?
- Inventory Turnover. A reduction in inventory will likewise free up cash. Do you know the time and cost of keeping old inventory on hand? Without a perpetual inventory system, it can be difficult to know the true age of inventory and hence the profit of the customers to whom these old items are sold.
These are just some of many items on the balance sheet where there are opportunities to unlock untapped cash flow.