Question

What controls are put in place by the best companies to maximize their cash flow?

Answer 1

Cash enables a company to proper and survive; and also is the primary indicator of company's health. While a company can survive for a short time without sales or profits, without cash it will die. No financial discipline is more vital than management of cash. Cash is categorised as most liquid asset of any business and indicates the basis for the development and existence of any business. In order to generate cash, a company need to effectively manage the activities that provide cash, including billing customers as quickly as possible, collecting cash on overdue accounts, disbursing payments only when they come due, and investing idle cash.

An effective cash flow means that the pattern of income and spending in a company allows it to have cash available to pay bills on time. Due to these reasons the inflow and outflow of cash need careful management and monitoring. The controls that a business can put to maximize their cash flow are:

--From management to sales, inform all together that cash flow is now the top priority.
-- Reduce purchasing costs; offering productivity incentives; training to employees to increase productivity

--Pulling receivables in before accounts payable

-- Pay Suppliers timely to avoid late fees

-- Reduce overhead expenses of company

-- Put more focus on higher-margin products with improved product mix

-- Re-negotiate long-term contracts for higher discounts

-- To increase profitability re-evaluate and fine-tune the pricing of company's products

--Replace old inventory and equipment can be cost-effective