Credit Sales & Company Cash Flow

An efficient Accounts Receivables management process will ensure that cash tied up within the sales cycle or business process is kept to a minimum. If your company can reduce the collection period and therefore the conversion of your accounts receivables into cash, then working capital can be released back into your business for use elsewhere, such as marketing to increase sales.

A worthwhile exercise for any company, is to compare the credit terms offered to customers against those offered by any competitors to ensure that the terms are not too generous. Another is to check whether customers are actually settling their debts to the agreed terms and timescales. Corrective action should be taken where problems are identified.

If at the end of the review too much cash is still tied up within the business sales process, then that is the time to consider accelerating company cash flow via a debtor finance option such as "Invoice Factoring Finance" or an "Invoice Discounting" facility.

If we take the factoring option as an example, then simply put, short term funds are obtained by selling your company accounts receivables to a third party in exchange for a discount fee. Factoring can be used where a cash flow shortfall is discovered or where funds need to be injected to generate company growth.

Shortening your debt collection cycle or utilising a debtor finance cash flow solution will produce beneficial results for the future prospects of any company. For further information visit our Working Capital pages.

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