http://www.cwhdallas.com/recevable-billing/
Recevable Billing
 |
No items matching your keywords were found.
OPTIMISTIC CASHFLOW IN CORPORATE SECTOR-NEED OF THE HOUR
It is well recognized that, Cash flow is the general progress of cash or funds of a corporate undertakings. Cash comes from sales, collection, and sale of assets. The cash flow is basically lifeblood of a business. The cash generated by businesses is used to discharge liabilities namely payment to creditors, Bankers, outsiders and expenses of the business. Hence, it is very clear that, Positive cash flow practices allow companies to have enough cash to meet its obligations. Sufficient cash guarantees that the requirements of a business can easily be covered if the company has it.
There are several ways in which a business can increase its cash reserves. This includes collecting accounts recevables, tightening credit requirements, taking out short-term obligations, increasing sales, managing payables, and investing excess cash in Government securities.
While collecting receivables, keep in psyche that
- Collections from the customers should be paid on time. Always make sure that all the billings and collection are working as efficiently as it possibly can.
- Have the clients pay company as soon as possible.
- Need deposits if possible and bill the clients on time so as to ensure that the collection will be paid on time.
- Keep the collection policies prompt and aggressive. When the billing is overdue, make sure to send a follow up billing to remind clients of past due accounts.
- Be cautious when it comes to the collection.
Lessening the credit requirements of the company can also be a great way to increase the cash reserves. This cash flow technique requires company to be very honest with company customers when it comes to credit terms. More strongly the credit requirements that company implement, more customers will pay in cash and less in credit thus reducing probable losses and non-collection. Company could implement client questionnaires that can help them in deciding whether or not to extend credit to company customers or not. Also, it allows company to keep valuable information such as addresses and telephone numbers which they can follow up on in the event of past due accounts or non-collection.
Company could also employ short-term obligations. In this technique, it can avoid the large cash out for large purchases and pay in several installments for company purchases. Because short-term obligations are usually collected after sales, company can have a higher amount of cash reserves. Of course, this will only work if most of the collections are paid in cash and not in credit terms. If the amount of credit sales is higher than that of cash sales, the tendency is to increase the accounts receivables instead of the cash. In order for this technique to work, it is best to use it side by side with tapering credit requirements.
In managing company payables, the best thing to do it is to keep company cash longer on hand. This means that company should hold on to it as long as company possibly can without making the bills overdue so as to incur penalties and late charges. Manage company payables well by learning which creditor should be paid first and if possible, try to lengthen company payment terms with company creditors by negotiation. To find out cash flow for any company or business organization, following formulae is used. For this purpose, data or variables can be extracted from the annual reports.
1. CASH FLOW= PROFIT AFTER TAX+ DEPRECIATION
2. PROFIT AFTER TAX= PROFIT BEFORE TAX-TAX
3. PROFIT BEFORE TAX= EARNINGS BEFORE INTEREST AND TAX-INTEREST ON DEBT
4. EARNINGS BEFORE INTEREST AND TAX= CONTRIBUTION-FIXED COST
5. CONTRIBUTION= SALES REVENUE- VARIABLE COST
In a nutshell, it is felt that, Positive cash flow means that company business has enough cash reserves to pay obligations on time. Because of this, company can be assured that company business will remain in operation and will prosper thanks to proper handling of company investments.
About the Author
Dr.R.SRINIVASAN is a Post graduate in commerce and corporate secretary ship . He received his doctoral degreein the Managementfaculty from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi . Delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. Supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades. UGC Sanctioned fund for the major project in Management (Finance area) for two years (2010-2012).
Thanks for visiting!
