Your credit card is a source of interest-free loan. But, this will work, if and only if you think of your credit card as a tool for personal cash flow management –rather than additional cash in your wallet.
It often happens that a purchase has to be made before your expected cash has become available. If you know that your cash will come in before the bill from the credit card falls due, make the purchase with your credit card –but pay off the whole purchase when your cash comes in and save yourself the interest cost. …read more

The Chinese ideograph for THINK is . It is a combination of the ideograph for BRAIN and HEART . Don’t you think this is the best way to think?
Mothers think this way.
graphics by Ren Garcia / image from Microsoft Clipart

AccountingSolver received an insightful comment from Mary Schaeffer, Author Controller & CFO’s Guide to Accounts Payable (John Wiley & Sons 2007) & 12 other business books, Editorial Director Accounts Payable Now & Tomorrow (http://ap-now.com/blog/):
“I just read a post on another blog recommending payment stretching as a way of improving cash flow. And, to be honest, it will do just that – at least temporarily.
But the pundits that recommend this tactic overlook a few things. First, it will annoy the you know what out of your suppliers. They have no interest in becoming your banker – they are worried enough about …read more

In order to avoid undue pressure on your cash (as the increase in Sales pushes up your Cost of Goods), you have to make sure that your accounts receivable & accounts payable are synchronized. You have to make sure that the number of days in which you collect your accounts receivable (i.e., credit sales) is always less than the number of days in which you have to pay your suppliers (i.e., cost of goods).
In a small business with not so many transactions, it is easy to track days receivable and days payable. If / when your credit program …read more

One of the most effective ways of stimulating sales is by injecting a credit program into your sales program (i.e., set up an accounts receivable).  If / when your credit program / accounts receivable results in a growth in Revenues as expected, your Cost of Goods will also grow in step with your Revenues.
In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.  One of the most effective ways of reducing the need for Working Capital is through suppliers’ credit or your accounts payable.  It would be a great advantage …read more

One of the most effective ways of stimulating sales is by injecting a credit program into your sales program (i.e., set up an accounts receivable). If / when your credit program / accounts receivable results in a growth in Revenues as expected, your Cost of Goods will also grow in step with your Revenues. Make sure that your Cost of Goods per unit stays the same (of course, the absolute / total amount will grow). With your Cost of Goods per unit kept at the same level (and with your accounts receivable not exceeding 25% of your …read more

One of the most effective ways of stimulating sales is by injecting a credit program into your sales program (i.e., set up an accounts receivable). However, you don’t want to have a lot of sales, but end up lacking enough cash to continue production and pay for operating expenses. Prudent thumb rules to follow are:
1 It goes without saying that you cannot extend credit of however short a term to customers whom you do not know or whom you know to have doubtful paying habits.
2 As a general rule, the portion of …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell or the services you render (i.e., your Cost of Goods Sold or Cost of Sales) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses). In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.
What you want to do with your Cost of Goods is to turn it into cash as fast as you can (i.e., sales). One way of stimulating sales is to extend …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell or the services you render (i.e., your Cost of Goods Sold or Cost of Sales) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses). In most businesses (specially where goods are produced), the greater portion of Working Capital goes into Cost of Goods Sold.
One of the most effective ways of reducing the need for Working Capital is through suppliers’ credit or your accounts payable. It would be a great advantage if you were able …read more

Working Capital funds the cost of the labor & materials that go into the goods you sell (or the services you render) and what you use to pay for salaries, rent, office supplies, etc (i.e., your operating expenses).
If you do not put up enough money for Working Capital –whether from Equity or Debt, you will be forced to incur more debt than your business can support. You will be forced to inordinately prolong accounts payable so that you get into trouble with your suppliers. Not having adequate Working Capital will place your business in an unsustainable cycle …read more