Question

Accounting question: please provide a few in your own words

Are there any recommendations you would make to improve the cash conversion cycle?

Answer 1

One of the ways you can ensure that your business is generating a positive cash flow is implementing a cash conversion cycle (CCC).

If you’re wanting to accelerate your cash conversion cycle, the folks at Gazelles outlined a few best practices to do so. Here are some of their top suggestions to keep in mind:

:- Analyze your cash flow and operations on a daily basis. Keeping better tabs on why things change over 24 hours and comparing your daily cash available to your weekly accounts receivable and accounts payable will give you incredible visibility into your business.

:- Ask your customers to pay you sooner. You might be surprised by how willing your customers are if you just ask.

:- If you ask your customers to pay faster, incentivize them. Offering a discount to those who pay in advance and sending friendly reminders will bring in cash faster. Plus, customers who are able to pay quicker will appreciate the value they receive in return.

:-If possible, time your invoices to coincide with your customer’s payment cycles..

:-Make your invoices easy to fill out and digestible. If your customers are paying later, that may mean that there are issues with your invoice.

:-Speedup the sales and delivery cycles. Completing projects more quickly likely means you’ll get paid sooner.

Why is the cash conversion cycle important to business?

Because Cash conversion cycle is an important metric for a business to determine the efficiency at which a company is able to convert its inventory into sales and then into cash.