EXECUTIVE SUMMARY
A credit sale makes part of the company’s capital available to the customer for a period of time. So the core question of receivables management is not only how much was sold, but how much capital was tied up, how long it stayed with the customer and when it returned to the company’s cash cycle.
If receivables grow faster than sales, the company’s working capital needs rise too. The size, ageing and concentration of the receivables portfolio are assessed alongside the company’s financial resilience.
Every extra day of payment terms granted to a customer means capital returns to the company later. The gap between supplier and customer terms creates the working capital gap the company has to finance.
“In a well-designed system, a company does not unknowingly become its customers’ bank.”
Open-account balances that keep rolling over and never close can, over time, become part of the customer’s working capital. This “open-account build-up” is made visible and manageable.
Ageing, customer concentration, contractual terms versus actual payment dates, financing period and capital in use with the customer are tracked together.
WITH ALMERA
01The sales–receivables–cash conversion relationship and its effect on working capital are made visible.02Receivables ageing, concentrations, open-account build-up and actual financing periods are analysed.03A Receivables and Working Capital Management System is set up that measures the capital in use with customers.A receivable is the part of a company’s capital that is deployed with the customer.
Real financial strength comes from a structure in which sales turn back into cash without consuming capital.
