Cash generation

A business-owner wants to know: Does the business generate enough cash? What are the sources of cash generation? How is the cash being used?
Cash generation is the difference between the cash that flows into the business and the cash  that flows out of the business in a given period of time. Cash flows into the company from the sales paid in cash and the payments by customers for previous sales made on credit. Cash flows out of the business for items like payments to suppliers, salaries, taxes, etc.
Cash gives you the ability to stay in business. It is a company’s oxygen supply. Lack of cash, decreasing cash or consumption of cash means trouble, even if other factors like profit margin remain good.
Do you know whether your company is a net cash generator? Why is it or isn’t? If it is not generating cash, is this because you have too much inventory that you are not selling?
Everyone in a company must understand that his daily activity uses cash or generates cash. A sales-person who negotiates a 40-day payment from a customer against 60 days, is cash wise. A plant-manager whose poor scheduling results in the accumulation of a lot of inventory consumes cash. All people have a role to play in keeping the cash flowing.  
 
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