The Big Three of Cash Management

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The Big Three of Cash Management

Their effect on a company’s cash flow




What are the “big three” of cash management and their effect on a company’s cash flow? As a business owner I experience the effects of the “big three” almost on a daily basis. When we talk about the big three of cash management we are referring to account receivable, account payable, and inventory. As business owner and operator I’m always trying to find better ways in which I can accelerate the collection of account receivables and stretch out my payables without losing our clientele or damaging our credit rating. My company is involved in a service type business – PRESCHOOLS.- Each of the four locations in operation are unique to the area we provide our service. Account Receivable

A/R is one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provided to the customer. In my business this is typically done by generating an invoice and delivering it to the customer, who in turn must pay it within 5 – 10 days. Our corporation has come up with several techniques to minimize the company’s A/R: •Electronic fund transfers (EFT); funds are transfer from the customer account to ours electronically. At the time of enrollment the customer completes a form with all their bank information and the date the money will be debited from their account. •Payroll deduction.

Credit card acceptance when customer does not have a checking account set up. An extra fee is charged. This is done not only to retain the customer by providing an alternative method of payment, but to also discourage the usage of credit. •If paid with check, this is run through a “Certegy Report”. If the check does not have funds available we still get paid by the bank. Check must be deposited the same day. •In extreme cases some A/R’s are...
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