Tuesday, November 11, 2008

Golden Rule? What Golden Rule?

CFO thought: now is the time to watch your receivables like a hawk. When corporate finances are tight, it is time to begin paying with a slow hand; or better, time to slow payments to vendors and step up receivables collection.

This brings up a perplexing problem: how can one expect others to pay timely and yet to pay slow himself?

The answer is the squeaky wheel. When you slow payables maybe 30-40% of your vendors will be on top of their game and contact you for payment. That means 60% will accept the slow payment terms.

If you are a fast tracker on receivables, you will be one of the 30-40% looking for collections in a timely, aggressive manner. End results, you win the temporary cash flow game. The big question is how focused is management on being in the 30-40% gainers?

Golden Rule for any sustainable success story is disciplined, focused action in four areas - in good times and in bad:
  1. Revenue Growth
  2. Cost Control
  3. Enhancement of Profit
  4. Increases in Cash Flow.
The companies that focus management effort in these areas are truly successful long term.

Any thoughts?

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