The Challenges of Cash Flow Assignment Example | Topics and Well Written Essays - 500 words

The Challenges of Cash Flow - Assignment Example This will enable customers to mail payments and checks processed by the bank as quickly as possible. Companies should use one bank to centralize and easily manage their cash. Tightening credit requirements – It is a marketing strategy to extend credit to customers to increase sales. Businesses often have to extend credit to customers, particularly when starting out or growing. Businesses should also scrutinize individual customers to assess the risks related to selling to customers on credit. Additionally, companies should accept credit cards although it will attract a small percentage of interest (Linzer, 2006). Increasing sales – increased sales would defiantly increase cash inflow. In order to achieve this objective, a company should sell more goods to existing customers and get new customers through advertisement of products and services (Jones, 2008). Pricing discounts – discounts on accounts receivable motivate customers to pay early in order to claim the discount offered. This will definitely improve cash inflow. However, this will reduce the firm’s profit margin. A company may delay payments to the suppliers as a counteraction. This must be done with a lot of precaution so as not to affect the firm’s credit rating. Securing loans – bank overdraft or other short-term loans can also be used to solve short-term cash flow problems (Linzer, 2006). A long-term amortized loan is also another way to solve cash flow during financial difficulties but it should sum up principal and interest until the loan is finally settled. Set cash flow targets- proper cash flow projections will enable your firm to properly estimate and project the required cash flow. The use of cash flow analysis tools like use of cash budget and projected cash flow statement are also effective (Jones, 2008). Make payment by your customers as