Three key control points for enterprise cash Flow Management

If the profit is equivalent to the blood of the enterprise, then the cash flow is equivalent to the air of the enterprise. There are numerous examples of companies in trouble because of the problems with cash flow management. As Dell's chairman, Dale, faced the company's losses: "We, like many companies, have been focusing on the income statement, but rarely on cash-flow issues." It was like driving a car, just looking at the speedometer on the dashboard and not noticing that the tank was out of gas.　　Dell's new operating order is no longer ' growth, growth, growth ', but instead ' cash flow, profitability, growth ', in turn. Therefore, business executives should not blindly stare at sales revenue and profits, but also focus on the cash flow of enterprises. According to my experience, can focus on the following three key points: first, around the enterprise's "sustainable growth rate", targeted adjustment "sales revenue real growth rate." A lot of people simply think that the growth of sales revenue can lead to profit growth, so it is subconsciously concluded that the faster the sales revenue is, the better. However, too fast growth can sometimes make the company's capital more nervous. When enterprises need to invest more cash than the company's operations to create funds, the shortage of funds is inevitable. Rapid growth can also lead to bankruptcy if management does not find and take effective measures to control it in a timely manner. So how to judge the company's growth rate is healthy and reasonable?　　Here I'll introduce you to an internationally common management tool, "sustainable growth rate". The so-called "sustainable rate of increase" is the maximum rate of growth of a company's operations without the need to deplete financial resources. Its formula is as follows sustainable growth rate = Shareholder Equity change value/beginning Shareholder equity = Net profit margin (P) x retained earnings ratio (R) x Total assets turnover rate (A) x financial leverage (T) by means of balance sheet and income statement, you can quickly calculate your sustainable growth rate and then associate it with your The actual growth rate of sales income "[sales revenue this year-last year sales]/last year sales revenue", can be roughly judged whether the growth of enterprises is "healthy." When "the real growth rate of sales income", the growth rate is too fast, when the enterprise should consider the financial problem is the extraordinary growth of capital from where to obtain, on the contrary, when the "real growth rate of sales revenue < sustainable growth rate", indicating the potential of business growth,　　Enterprises should think about how to deal with surplus funds. Second, reasonable planning, management of enterprise Accounts receivable and Accounts payable. The net profit and cash flow should be consistent in the case that the enterprise sells the goods or provides the services in cash only and does not exist any depreciation of the assets and expenses and investment, i.e. the income increase causes cash inflow and the cost increases to form the outflow of cash. But this is just an ideal assumption. In fact, the difference between net profit and cash flow is objective, and the fundamental difference is that the confirmation of both is different from the basis of measurement. The net profit is calculated byAccrual basis, and the calculation of cash flow is based on the system of receipts and payments. This leads to "accounts receivable" and "Accounts payable" as one of the important factors that affect the difference between net profit and cash flow (the two actually have not yet produced cash flow but have already affected profits in the income statement).　　This shows that enterprises must attach great importance to the management of accounts receivable and accounts payable. Generally, when a customer delays payment, and the supplier is anxious to return, the enterprise payment cycle is shorter than the collection cycle, it may fall into the difficult situation of capital turnover; Conversely, when the corporate payment cycle is longer than the collection cycle, the larger the business volume, the greater the amount of "interest-free loans" obtained from the supplier. To give a simple example, the cost of raw materials for an enterprise is 600,000 yuan, the staff wage cost is 100,000 yuan, sales profit is 300,000 yuan.　　If the accounts receivable can be accounted for within 30 days, and the payment should be paid 60 days later, then the equivalent of the company "free" access to "1 million yuan in the bank for 30 days of interest" income. If the company does not store the 1 million in the bank but continue to expand, then in the 60-day accounts payable cycle, the company can also complete 1 of the same business, that is, to get more than 300,000 yuan of "theoretical" profits.　　This shows that if the effective management of the enterprise's receivables and accounts payable, not only can avoid the invalid cash consumption or the emergence of cash flow adverse situation, but also cleverly to the enterprise derived a considerable amount of cash to support various business/investment activities. Third, the development of "monthly cash flow forecast table" to monitor the cash flow of enterprises in a timely manner. Because the cash value in the annual cash flow forecast is just an average, enterprises can not know the specific situation of cash each month, can not ensure that the monthly cash adequacy, therefore, I suggest that your company should proceed with the preparation of "Monthly cash flow Forecast", which is more conducive to the actual situation of the cash flow of enterprises to make timely adjustments.　　When the enterprise monthly cash surplus, the enterprise can choose to invest in new projects in order to activate their cash to maximize their profits, and when the company's monthly cash deficit, enterprises should decide whether to raise money or reduce investment or accelerate the recovery of funds, so as to avoid the emergence of capital chain situation. In the preparation of the "Monthly cash flow Forecast", the enterprise must first list the forecast period of the enterprise all the estimated cash income and cash expenditure items, by calculating the difference between the two to determine the forecast period of the enterprise "net cash flow." In addition, the enterprise must also clear the forecast period of "opening cash" and "enterprise minimum cash demand." In which, "beginning cash" is the end of the last accounting period of cash, "the minimum cash demand for enterprises" as determined or assumed according to company policy values. "Cash at the end of the period" can be determined by calculating the sum of "opening cash" and "net cash flow" for the current period. Compare "cash at the end of the term" with "minimum cash demand for the enterprise" to determine whether the cash will be surplus or deficit during the forecast period of the enterprise.