Possible actions to improve cash flow

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  • Created by: Jashy
  • Created on: 08-05-13 10:51
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  • Possible actions to improve cash flow
    • Take longer trade credit from suppliers
      • supplier expects payment within 21 days of delivering the reeds and straw. Jem is not being paid until after the roof is finished - serious problems as cash is going out in advance of cash coming in. asking suppliers 60 or 90 days may delay cash outflow until more customers deposit are taken which can help bring more cash into the business.
    • Taking a large deposit from customers
      • by taking 10% deposit on a room priced at around £20000   this means that jem has only £200 in cash in order to pay fro wages, stocks and straw etc. if he took a deposit of 40% it would enable him to bring more cash into the business enabling these cost to be met without serious cash flow problems
    • Giving customers 30 days to pay the final balance
      • been several months before the roof is thatched it makes no sense of jem to then allow customers another 60 days to pay the invoice. this simply means delays cash inflow longer. he needs to be strict and ask for the balance to be paid after just the 30 days which will bring the cash in sooner.

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