Cash Management

Excessive Inventory Can Be a Burden

This continues a series of posts focusing on how to manage cash and how managing assets, expenses, and liabilities impact it. Along with accounts receivable which I discussed in Read the rest of this entry »

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All Those Accounts Receivable are not Impressive

In a series of articles I’ve been focusing on how to manage cash and how managing assets, expenses, and liabilities impact it. Now I want to be a little harsh in one particular area.

Receivables are Every Where

Perhaps when you look at your financial statements and see accounts receivable that represent 70% or more of your current assets you are impressed. Should you be? Read the rest of this entry »

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Turn Your Assets into Cash

Assets are great, but understanding how to use them to increase you cash is imperative. In the blog posting Know What Causes Your Cash Balance I discussed the need to understand just what actually causes your cash balance to be what it is. Now I want to go a step further to deal specifically with other ways to turn your assets into cash. Read the rest of this entry »

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Know What Causes Your Cash Balance

Do you really know what causes your cash balance? I suspect many people don’t really stop to consider this.

It’s Not the Cash

In the blog Cash Management-It’s Not About the Cash Account I wrote about this some, but now I want to reemphasize what I think is often overlooked. Read the rest of this entry »

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Cash is a Necessity and Not a Luxury

Some companies think they are financially strong because they have lots of assets. But the makeup of those assets makes a big difference. What do I mean by that?

Can You Spend It

I touched on this earlier in the posting Read the rest of this entry »

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The Proactive Business versus the Reactive Business

Does your business take a proactive approach or merely react to events? The difference is more than semantics.

What Does Proactive Mean?

Essentially being proactive means being anticipatory or to prepare for the unexpected. For example, rather than Read the rest of this entry »

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Debt Can Kill Growth

It is very common for companies to go into debt to finance growth. Is that always a good idea?

Debt-A Financial Demon

Many a person has purchased something like furniture on credit. Now, there is nothing inherently wrong with that, especially if they have ample income to make the monthly payments. However, many learn some very important lessons they hopefully will never forget. Perhaps after three or four months of making payments they realize how they hate making those payments. Not only that, these payments can restrict what they can do as the payments cannot be avoided, at least if they want to build and maintain a good credit rating. They may even find that the furniture they bought no longer looks as good to them as it did. But, this is just on the personal level. When it comes to business, debt can kill growth for similar reasons.

Servicing Debt

Servicing debt means making the agreed to payments of interest and principle. If cash flow is adequate this may not be difficult. But, if the total obligations that a company has for expenditures of any kind becomes excessive then a cash crisis can easily develop. When that happens the company may be surviving day-to-day. It’s easy to see why debt can kill growth. Any time a company considers taking on additional debt they need to ask a few fundamental questions, such as:

  • Will the cash generated be sufficient to cover payment?
  • What is the payback time for the debt?
  • If the debt is for something like equipment, how long will it take before they recover the cost through additional sales and profit?
  • Is there an alternative?

One example of how timing is an issue has to do with depreciation. Perhaps equipment is purchased using a three year note payable. If this equipment is depreciation over say five years then the depreciation deduction is insufficient during those three years of note payments to offset them. In that case the additional sales or efficiency the equipment contributes needs to be sufficient.

Some Key Things to Monitor

If you do find that your company needs to go into debt, be sure to consider a few key ratios, such as debt-to-equity, debt leverage ratio and debt coverage (see Debt Coverage). Since debt can kill growth, be certain you can justify it. One other thing to keep in mind is that anytime your company has debt it opens the door to additional pressure from outside the company.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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Sales and Accounts Receivable

Every company focuses on growing sales. That’s good, but how many also track the growth of accounts receivable? Often the growth of one does not mirror the growth of the other. Read the rest of this entry »

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Lean Assets

You may have never heard the term lean assets. It’s really refers to both a mindset and assets. Here is what I mean by that.

Laying the Groundwork

This is really part of a series of articles intended to address having adequate cash to operate your business. Read the rest of this entry »

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Stop Giving Away Sales

So, are your sales are right where they should be or even better? Is that an accurate picture? It may be you need to stop giving away sales?

But, Isn’t a Sale a Sale?

It is easy to get excited when we see good or great sales numbers being reported. However, unless Read the rest of this entry »

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