It’s no surprise that small and medium-sized businesses are more at risk in the current economic climate than their bigger brothers and sisters. The key to minimizing this risk is for organizations to fully understand their business cash cycles. After all, cash is king.
A recent article published by InAVate outlines the key strategies that organizations can use to manage their cash successfully. In order to succeed, many of these strategies require assistance from the accounts payable department.
For instance, the author acknowledges the importance of negotiating favorable payment terms with suppliers. However, he also understands that large suppliers often have the leverage in a relationship. In response, one of the best ways for an organization to manage their inventory is by mandating purchase orders.
Another key capability all organizations should have is the ability to forecast their cash flow positions. You must be able to easily identify your cash on hand and your upcoming income and payments. This will allow you to make all kinds of cash management decisions, including whether your organization can afford to make a capital expenditure now or hold off until your cash receipts are up.
Effective cash management actually involves many departments such as accounts receivable, inventory, and accounts payable. Companies that understand the importance of cash management will likely be the ones to survive the credit crunch.
