Purchase Increasing Cash Velocity
Increasing Cash Velocity: The Theory of Constraints Approach to Cash Velocity by Dr Lisa Lang
In this ebook we discuss cash velocity. Cash velocity is a component of the wider topic of cash flow. Both cash flow and cash velocity are like good health. When you have it, you don’t really notice. But for many companies the time between when they have to pay their vendor and when they get paid is large and getting larger. In many industries customers are pushing out payables to improve their cash positions, thereby reducing yours.
Cash velocity is the throughput (T) you generate divided by the time it takes to generate the throughput. Throughput is the selling price of your product/service minus what you paid your vendors to generate and sell your product/service. The time it takes to generate the throughput is the cash-to-cash cycle time. Cash-to-cash cycle time (CtC) is a ratio that serves to highlight the amount of time a company must finance raw material. It is the time between when you spend money necessary to produce your product or service until you get paid from your customers for the finished goods or services.
The book explores how to increase Throughput AND how to decrease your CtC cycle time so that we can increase your cash velocity.
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