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Cash flow is king

Cash flow is king, right? Or at least it should be, for all companies – no matter the size. A lot of companies are still focusing mainly on profit instead of working capital. Profit is important, but positive cash flow is what keeps a company going and increases the company’s value.

To increase company value, it is of most importance to have a well-functioning Cash Management to ensure control of the company's liquidity, where it is located, and how it becomes available. A well-managed handling of liquidity and a strong cash flow have a direct impact on company profitability and competitiveness.

So, how does one ensure a positive cash flow?

Let’s take it from the beginning. Cash flow is the flow of a company’s payments and payouts over a certain period of time. To create a positive cash flow, it’s important to establish efficient processes in order to get paid as quickly as possible and to set great routines for company payouts.

Today, many companies struggle to get paid on time for their accounts receivable. Customer payments constitute the most difficult liquidity flow as it is beyond the company's own control. Acting bank to its customers quickly degrades cash flow and the company's liquidity, which thus degrades competitiveness which in the long term can damage the company's brand. In order to ensure the company's inflow, it is important to set up a clear and structured billing process with clear invoices as the basis on which all essential information appears. With fully digitized billing and reminder management, there are good conditions for improved cash flow and reduced operational costs.

"With fully digitized billing and reminder management, there are good conditions for improved cash flow and reduced operational costs"

Success or bankruptcy?

The lack of efficient and structured Cash Management processes can be the difference between success and bankruptcy. It is therefore important to pay attention to some simple performance criteria that can be of decisive importance for the company's cash flow and liquidity. Days Sales Outstanding (DSO) is an important performance indicator of how well-designed processes a company has.

DSO gives an indication of how many days on average it takes for a company to get paid. In simplified terms, DSO is calculated by dividing accounts receivable by total credit sales and multiplying by the number of days in the period. DSO is often calculated on a monthly, quarterly, or annual basis.

An improved DSO improves liquidity and generates more leeway. Being able to pay suppliers faster can generate discounts and reduced credit needs which leads to keeping off unnecessary interest costs. Improved liquidity and stable cash flow strengthen your brand, generate competitiveness and endurance in times of economic downturn.

The first step towards positive cash flow

This is where we at Axactor come in. We are experts in helping companies develop efficient processes for invoice management, reminder management, and debt collection solutions. Through our modern system solution, companies are offered a fully scalable solution for all, or parts of, companies' invoices and claims handling processes. With Axactor as a partner, we can help your company secure the entire company value chain and act as a natural extension of your service that also meets your requirements for brand strategy and reputation.

With Axactor's specialist knowledge and solutions we can help companies to:

  • Develop efficient and innovative processes for the company's entire value chain
  • Improve DSO through reduced capital injection and improved cash flow
  • Reduce operational costs through a high degree of automation
  • Ensure quality, compliance, and efficiency

Does your business need help? Contact us and we'll solve it!

Lauri Holländer

Sales and Marketing Director

lauri.hollander@axactor.com