How to Come Out of Cash-Flow Trap

Business owners/CEO’S lament the lack of funds that stutters the growth of the company.
While this position might be right in couple of situations, in most of the cases we have found efficient management of funds is missing

Below is one case study:

Background: This Client was in the business of executing industrial projects. The client was in deep working capital problem. They were not able to pay their suppliers and employees on time.

Every month-end they struggled to arrange the fund for salary payments. Management was spending their entire month in arranging funds to pay salary or clear the supplier’s payments to whom PDC’s ( Post Dated Cheque) were issued

What We Did: We prepared detailed projected day wise cash flow statement for first three months. The cash flow statement was divided into Cash-Inflow and Cash-Outflow.

The inflow section was populated with the collection numbers expected from the future sales and existing receivables. The outflow section was populated with numbers where payments need to be done immediately and where payments could be stretched or delayed.

Results: This exercise helped in assessing shortage of cash on a particular day and helped to prepare the action plan to manage the shortage of funds proactively. Consequently, collections team started following-up aggressively for the payments.

This brought to light the reasons why the payments were not made in time, like non-delivery of products on time. Subsequently, a robust process was designed to avoid such issues in future

At Soatech, we help companies to become cash-rich and profitable.