Question

Case 1: You are the Receivable Manager

You are analyzing your receivable for the period and you are concerned that the average collection period is lengthening. What specific actions can you take to reduce the average collection period?

Mention at least three actions.

Case 2: You are the Operations Manager

You are analyzing your inventory turnover report for the month and are concerned that the average days inventory outstanding is lengthening. What actions can you take to reduce average days inventory outstanding?

Mention at least three actions.

Case 3: You Are the Chief Financial Manager

Assume that you are the CFO of a company that has a larg investment in plant assets and it sells its products on credit. Identify steps you can take to increase your company’s cash flow and, hence, your company’s firm value.

Mention at least 4 steps

Answer 1

Case 1

· Discounts for early payments

Designing discount structure for debtors who pay earlier than the credit period sanctioned will motivate some debtor’s payments to clear faster.

· Reward for timely payments

rewarding debtors who have a history of timely payments will ensure timely or earlier payments by those debtors going forward.

· Collection improvement

Increase the efficiency of the collections from debtors; some of it can be done by a dedicated team force.

Case 2

· Reduces order sizes

Large, infrequent orders for a varying demand can lead to high inventory. Keeping orders small and frequent benefit the company through reduction of inventory and cash flow management.

· Enhance Demand Forecasting

Demand forecasting is a challenging component within a supply chain. Considering that demand can change at a moments notice, having an accurate system is vital. This is how production facilities are able to actively combat swift demand changes.

· Supply chain time reduction

Reduction of supply chain lead times such as manufacturing and supplying will lead to inventory reduction. This calls for a measurement of factors such as throughput and cycle time for there to be able to be an approximate lead time reduction.

Case 3

· Improve marketing

The reason is that improving marketing reduces your cost-per-lead, boosting the lifetime value of your customers and opening up untapped markets.

· Use Electronic Payments

If you pay electronically, you can wait until the morning of the day a bill is due to make payment. This buying of time improves your cash flow.

· Identify new markets

this may be as simple as some thoughtful and creative brainstorming that results in new ways you can market your product or service to other consumers based on their needs . In others, you may need to do some significant consumer research and examine the efforts of your competitors or potential competitors.

One great way to identify new markets is to actively engage the correct social media accounts.

Doing so can put your brand and products in front of more and more potential clients or customers and engaging with those customers can help you determine new and existing ways to market your product or service.

· Reduce operating costs

Take the time to review your expenses, and identify areas where you can reduce your costs. Do not spend money on expenses that are not necessary for your business, and be careful which areas in your business you choose to focus on.