What is the time of cash conversion?
The time of cash conversion is the part of the time that will run out of the time when the sale of goods or services and when cash is actually received for the product sold. Within the scope of this period, the customer's buyer, which needs to be prepared and submitted to the customer, and how long it takes for the customer to proceed to the payment and the recipient records that the part is charged by the accountable part of the accounting books. One thought school takes this period a little further, given that the starting point is when the seller initiates a customer contact that leads to sale, although this is not always consideration.
The idea of identifying cash conversion periods is to get an idea of a time delay that occurs between the use of corporate resources and when the company actually receives Renesingurn for this effort. Identification of elements or events that occur over the period allows to develop proportionateOU time line and have a good idea of when payments are most likely to be raised, which will allow the company to use this income collected. At the same time, the identification and evaluation of each process that occurs during the period of conversion of cash can often help in finding ways to speed up the acceptance of payment, and shorten the time delay between sales and the acceptance of cash related to this sale.
A few elements go to any period of cash conversion. This usually begins with an extension to the customer. The order is placed after the price is received. The process then moves to fulfill the order, which may include the production of ordered items, ensuring transport to the customer and finally delivery of this order. Hence the billing of the order, the invoice is ready and handover, with specific payment terms. The last phase of the cash conversion period focuses on the acceptance and publication of the payment, and the date of dispatch is used as a PR dateabout a given period.
by assessing time that takes to successfully complete each of the events associated with the cash period, the company can sometimes reduce the duration of the period and have access to cash from the transaction earlier than later. For example, if the production process can be improved to reduce the amount of time to produce items for sending items, it will have an impact on the duration of the cash conversion period. Similarly, if the invoicing process can be streamlined to receive an invoice earlier, this helps to promote a faster payment problem. Even small things, such as offer the customer a discount on timely payment, or to ensure that the payment is made electronically than cutting and the mail of the check often helps shorten this period and allows the company to enjoy a more pleasant cash flow.