Reading Financial Reports For Dummies, 4th Edition

Chapter 16

How Companies Keep the Cash Flowing

IN THIS CHAPTER

Delaying bill payments to increase cash flow

Collecting accounts receivable more quickly

Using a receivables securitization program

Ordering less inventory

Finding quick cash

Managers sometimes face a shortage of cash to pay the bills, and they need to find ways to fix the problem. They can use different strategies to get their hands on cash quickly when running a business.

In this chapter, I review the pros and cons of the possible fixes available when a manager finds a red flag about a company's cash flow.

Slowing Bill Payments

Short on cash? Well, maybe you can just let your bills slide. It may not be the most responsible policy, but sometimes doing so can get a company through a fiscal rough patch — as long as its suppliers are relatively patient. When businesses buy on credit and don't have to pay cash upon receipt of the goods, this is called trade financing. Often businesses must pay for those goods within 30, ...