The first step toward taking control of your company’s cash flow is to analyze the components that affect the timing of your cash inflows andoutflows. Athoroughanalysisof these components will reveal problem areas that lead to cash flow gaps in your business. Narrowing, or even closing, these gaps is the key to cash flow management. Some of the most important components to examine are: • Accounts receivable. Accounts receivable represent sales that have not By Jim Fisher Cash Management Tips for Small Businesses, Part 2 yet been collected in the form of cash. An accounts receivable balance sheet is created when you sell something to a customer in return for his or her promise to pay at a later date. The longer it takes for your customers to pay on their accounts, the more negative the effect on your cash flow. • Credit terms. Credit terms are the time limits you set for your customers’ promise to pay for their purchases. Credit terms affect the timing of your cash inflows. A simple way to improve cash flow is to get customers to pay their bills more quickly.
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