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Write a discussion response to the statement below:
There are four main objectives with managing cash for any company:
1. Increase cash flow into the business
2. Decrease the cash flow out of the business
3. Receive cash as quickly as possible and
4. Pay out cash as slowly as possible.
Companies like to push the boundaries on their accounts payable as the longer they have that cash available to them the more they can earn interest on that cash or invest in short term opportunities to raise more capital. Companies have to be very careful with this approach as if they start to pay late it could impact their relationship with their vendors and/or make them a risky company to do business with.
Companies also like to receive their cash as early as possible so they offer their customers incentives to pay off their debts early by offering them discounts. Another way is to offer computerized transactions through electronic fund transfers. This approach is much faster than paying by checks which actually ends up costing the firm more money to process that transaction and is the less desired approach in this day and age. Companies are definitely capitalizing on how technology is helping them manage their business.
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Identify which of the following will decrease the cash cycle.
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