In the past, we have published Tips and articles explaining the role of Credit Management in the Cash-to-Cash Cycle. This is a reminder along with five tips that may help you and your company.

Managing Cash Flow: the Life Blood of Your Company's Liquidity
Credit Managers are responsible for credit decisions and collection practices that ensure invoices are paid as soon to terms as possible. That is only part of the liquidity formula. Other stakeholders who manage inventory turns and Accounts Payable practices play a critical role as well. As a credit manager, you need to be aware of how these functions interplay with yours, to deliver the cash and sales forecasts your company depends on. This requires an understanding of your company's cash-to-cash cycle and the part you play.

The Cash-To-Cash Cycle: Critical Roles Defined
The cash-to-cash cycle measures the time in which your company takes on a payment obligation from suppliers until there are good funds deposited from accounts receivable collections. Let's revisit the key roles:

• Sales develop a sales forecast
• Finance develops a cash forecast
• Treasury makes borrowing decisions based on cash requirements
• Inventory and staff are acquired and staged to support sales expectations
• Accounts payable and salary obligations are committed and then paid
• The order-to-cash process brings in cash receipts and can reduce the need for borrowing

Here are six tips to focus on driving the cash needed for your company to sustain itself, remain competitive, and grow:

1. Set targets for a quick turnaround time for Credit decisions: In addition to being frustrating to Sales, Customers, and Applicants, unnecessarily slow credit decisions impact your company's ability to meet its sales and cash forecasts. An inefficient credit review and decision process may leave purchased inventory sitting in the warehouse. Unfortunately, the Accounts Payable clock is ticking. Shipment delays widen the gap between payments to suppliers and cash collection. This can put a real strain on your company's liquidity, increasing the need to borrow.
2. Focus on your collection practices: Set collection targets! Be sure collectors are well trained and have the automation tools they need to efficiently monitor accounts and maximize collections. Deal with any process issues negatively affecting collections. Manage collections aggressively.
3. Be sure invoices are delivered to your customers as quickly as possible: Delays can negatively impact your customer's ability to process payments to terms. Delays in collection negatively impact your company's cash forecast and liquidity.
4. Investigate and correct process or system issues impacting invoice accuracy: If you find repetitive issues driving disputes and deductions, find out why, and make corrections. One fix can avoid hundreds of time-consuming investigations and corrections. Don't forget, customer care can affect future business and revenue if customer care is lacking.
5. Set targets for timely and accurate remittance applications: Slow and inaccurate remittance applications can lead to unnecessary collection efforts. If a customer's payment has been received but not posted accurately, invoices may falsely show as past due. This can unnecessarily delay orders or credit hold releases. And can also irritate your customers and damage relationships.
6. Meeting with other stakeholders to coordinate your company's inflows and outflows: Coordinate efforts to meet the overall cash conversion cycle targets.

Conclusion:
As a Credit Manager, you are responsible for key components of your company's cash-to-cash cycle. There are other equally important stakeholders who drive your company's inventory acquisition and turns and accounts payable outflows. It is essential for you to be aware of how these functions interplay with yours, to coordinate management of the entire cash conversion cycle efficiently.