CASH FLOW – volume one

Cash cycle analysis

For next few months I will focus on cash flow. Cash flow is probably the object causing the most stress in any business. This month we will focus on how to use cash cycle analysis to generate more cash in the business.

The cash cycle can consist out of the following components:

• Accounts Receivable Days

• Accounts Payable Days

• Inventory Days

I will cover two in this newsletter, accounts receivable and accounts payable.


Accounts receivable is the amount of money that clients still owe your company.

This is money owed to the business, BUT not available to utilise.

Accounts receivable days are the amount of days it takes your clients to pay you.

The formula for calculating: Accounts receivable / (Sales / 365)

The more days you calculate in this formula, the longer your cash are tied up in somebody else’s bank account.


Accounts payable is the amount of money owed by your company to suppliers.

Accounts payable days are the amount of days in which you pay your suppliers.

The formula for calculating: Accounts payable / (Cost of sales / 365)

The more days you calculate, the longer you take to pay suppliers.


To utilise the most out of these two components (maximum cash flow) , you need to collect your outstanding account reveivable as soon as possible and stretch your accounts payable as long as possible.

A few tips to:

Reduce your accounts receivable

• Sent out invoice more efficient. Sent directly to the correct person by email.

• Sent out statement of accounts weekly or twice per month, to remind your clients of you.

• Provide discount on early payments of accounts

Utilise from accounts payable

• Use your credit terms provided by suppliers.

• Negotiate longer terms with suppliers.

Please feel free to contact me for a consultation regarding the above and to analyse your business.

You can do this by reply to this newsletter or complete our contact form on our website

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