Several adjustments can be made to any business that will positively effect their inventory concerns and their cash flow.
First, you find the optimal level of working capital by comparing your current working capital with your current profitability. Adjustments to these amounts can swing the ratio more in your favor.
Next, track your creditors and debtors to quantify the term of your cash conversion. You can establish or revise terms of the frequency of the payments made to your suppliers against the payments you receive from your customers. Squiggle and adjust these terms to benefit the cash flow in your favor.
Third, examine the liquidity levels of your industry, taking special notice of the seasonal and campaign plus/minus you are currently using. Your system should be jockeyed to emphasize your benefits and lessen your detriments.
In addition, assess your company’s overall financial process in comparison with your capital requirements. This ratio is integral to your overall success. Such analysis will lay before you the particulars of your financial system and will indicate what aspects can be re-structured in your favor.
Lastly, you should establish a schedule that can help you eliminate that eliminates your company’s need for debt financing. This ideal state of self-sufficiency will increase the marquee value of your business’ reputation. Structured consolidation of debt and taking advantage of every interest rate loophole will see your future benefit from every superior level you can achieve.
These five listed avenues of improvement are only a handful of ways you can improve the cash flow status of your company. but are all practical and basic ways to take first steps toward cash fluidity and future solvency.