Cash Conversion Cycle - Ways to reduce
August 02, 2024
by a professional from University of California, Berkeley in Sacramento, CA, USA
When going into a deal, as a ETA CFO, I think it's always important to look at cashflow. Namely, map out their Cash Conversion Cycle and find ways to how to reduce it.
The Cash Conversion Cycle (CCC) = time it takes to convert your investment to cash from customer.
In a NEGATIVE CCC scenario, customers are pre-paying before you spend money on delivering their services. Of course, that's not always possible. So.. how can a Fractional CFO partner with an Acquisition Entrepreneur to reduce CCC and increase cashflow?
Here are some strategies.
- Faster collection
- Increase prices
- Increase sales volume
- Reduce COS
- Reduce Overhead
- Delay paying bills
Which ones do you think is the most effective? Which one gives you the heartburn? Sometimes, the strategies seem mutually exclusive.... how do we balance it all?