Guide to Cash Management: How to Avoid a Business Credit Crunch
Format: PDF / Kindle (mobi) / ePub
The credit crunch highlighted to businesses the importance of cash management, as those firms which ran short of cash discovered when they found themselves in trouble or even went bust.This tightly-written guide clearly explains the six critical aspects of the effective management of cash and cash flow.
the outset and on renewal of facilities. Fixed-rate loans for a fixed term are the simplest to forecast. For variable-rate loans the uncertainty is in predicting the interest rate that will prevail. One way to determine market expectations for interest rates is to look at the yield curves quoted in the financial media. These show the market rates for future-dated bonds relative to the current base rate. This indicates what the market expects to see happening to interest rates in the future. The
the business. Supplier statements provide a summary of the invoices received. It is important to carefully check invoices submitted for payment to ensure that only valid payments are made. Typical errors involve quantities, prices, credit terms, taxation treatment and even the arithmetic. Although the matching of electronic purchase orders to supply agreements can be automated, simple common-sense checks should be used to challenge all large amounts or frequent items (to make sure that multiple
can be costly in both the expense involved in resolving the issue and the adverse effect on cash flow due to delayed settlement. FIG 4.10 The order to cash cycle Account management Customer accounts A customer account specifies two things: trading terms and settlement terms. It is important to be clear about the purpose of each: Trading terms are about managing profitability and involve prices, discounts, overrides for achieving quantities, and so on. Settlement terms are about managing
contingency 47–49 contracts avoiding cronyism or corruption 114 breached 130 call-off 115 negotiations 37 convertibles 67 copyrights 43 corporate governance 92 corporation tax see under taxation costs activity-based costing 170 apportionment 169–71 and cash flow forecasting 22 construction 149, 150 debt recovery 129 defined 9 direct 33, 165, 166, 173 direct fixed 166, 168–71, 168 fixed 33–35, 34, 142, 166–67 indirect 33, 165, 166, 173 indirect fixed 166, 169, 169, 170, 173
annual process that takes place up to six months before the start of a financial year. Nine months or a year later and in a volatile market their continued relevance can be questionable. Some businesses use rolling forecasts instead of annual budgets; aligning cash flow projections to this process would avoid duplication of effort and ensure a congruence of management information. With an indicative forecast unit volume derived from these techniques, the tactics required to “farm” the existing