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Transcript of Cash Flow
Other..... Poor Cash Flow It is important to understand your businesses need for cash and avoid unnecessary cost of borrowing cash flow Hint:
Poorly managed cash flow often leads to a liquidity crisis Hint:
Cash is King understand Advantages Days Sales Outstanding:(DSO) See Where Cash Good Cash Flow management By SEPSO is Tied Up Spot Potential Bottlenecks Gives you the ABILITY to.... REDUCE dependency on bankers Save on interest Identify Surpluses Days Sales Outstanding Invoiced Sales in Period Number of Days in Period Calculating DSO: Accounts Receivable (June) Did $1,000 in invoiced sales Invoicing Make Your Payment Policies CLEAR From The Beginning Be Creative "The best way to predict your future is to create it."-Unknown Accept All Forms of Payment Drive Passion Billing and Taking Payments Online- Studies show up to 40% of consumers pay the same day they receive an invoice in their email with the option to pay online Get a Deposit in Advance In some cases it is good to take a partial payment up front (helps prevent midnight movers and other problem tenants) Electronic Invoicing DSO = Accounts Receivables Invoiced Sales in Period x Days in period DSO Measures Efficiency not Effectiveness Company generated $1000 in "credit sales" Net 30 Credit Term Started the month with $700 in receivables Received $500 in payments for receivables $700 + $1000 - $500 = $1200 Note: It does not matter what invoices the $500 was applied to. What matters is what the A/R is at the end of the period. June = 30 Days Calculating DSO = $1,200 $1,000 x 30 = 36 day average What does this mean? This shows the average number of days it takes you to collect accounts receivable. (Assuming Net 30 day credit terms under 40 is fairly efficient)
What is yours? Understand your need for cash and see if your DSO is efficient Success POOR Cash Flow management can devastate a business Interest cost can add up quick What are you missing out on? Solvency Risk Can lead to going out of business Restricted Growth Effects Of Poor Cash Flow Management Calculations other useful Average Collection Period measures length of time it takes to turn average sales into cash Average Collection Period = Current Accts. Receivable Balance Average Daily Sales Where Average daily sales = Annual sales 365 Receivables Turnover Ratio measures the effectiveness of a firms ability in extending credit and collecting on debts Accounts receivable turnover = Net Credit Sales Average Accounts Receivable low ratio - implies the company should reassess its credit and collection policies (check industry average and compare yourself) Questions to ask yourself.... How much cash does my business have/generate? When do I need the cash? and when do I usually get it? How much cash do I need to operate sufficiently and what would I be able to do if I had more cash? How are these questions affecting my ability to expand the business? Thank You for Joining Us Questions? Questions to ask yourself about invoicing: What percentage of your customers are late? and what are the reasons? How much time are you and your staff spending collecting on invoices? What can be done to get paid quicker? What is your customer retention rate and what are the reasons customers leave? What is your cost to produce a paper invoice How will good cash flow management help in your business? Nearly $40 of every $100 spent worldwide is with a card; and each year, card use continues to grow. Whether you're a new business or an established enterprise, card acceptance will have a big impact on your bottom line. Accepting cards offers the following benefits for your business:
Increased Sales - Not only will you have more sales by taking cards, multiple studies have proven that consumers spend more on cards than they would with cash or checks.
Improved cash flow - Funds are electronically deposited into your designated deposit account and are available for you to use typically within 24 to 48 hours.
Increased Customer Satisfaction - Customers will appreciate that they have choices in how they pay. This appreciation will result in improved customer loyalty.
Improved Operational Efficiency - Accepting cards today is quick and easy. This will result in shorter check out times, as well as reduce the time it takes to manage and reconcile your payments.