A company’s profitability is often determined by how well vital departments are managed internally, and the amount of time it takes to turn cash into more cash is often a tell-tale sign of how efficient the accounts payable (AP) and accounts receivable (AR) departments are at managing cash flow.
A recent article in Forbes highlights one measurement that is used to determine the efficiency of a company’s cash management, the Cash Conversion Cycle (CCC), which measures the amount of time in which a business can turn over cash on hand. For those that aren’t familiar with this measurement, the CCC follows cash through an organization, beginning as inventory, transitioning to accounts payable, moving through sales and accounts receivable, and then back into additional cash for the company. Further, the CCC measures how long a business will be deprived of cash if it increases its investment in resources in order to expand customer sales.
Investors use the CCC, in conjunction with other measurements like Days in Inventory, to determine the overall health of a company, and how efficiently the company manages inventory, accounts receivable and the accounts payable process. A low or gradually decreasing CCC rate should be the goal for companies aiming to stay ahead of competitors and ensure efficiency in management.
So what steps can organizations take to decrease the CCC? Solutions like MetaViewer provide a way for businesses in every industry to increase the efficiency and effectiveness of their AP/AR departments, decreasing the amount of time necessary to process incoming and outgoing invoices. The Paperless ERP software allows users to better capture, manage and access data through the lifecycle of an invoice, plus companies save time and money by eliminating the need for paper processing and mailing, as well as simplifying the overall business process.
A well-organized and effective AR/AP process plays a vital role in a company’s ability to turn cash into more cash, ensuring that your business’ CCC is lower than the competition. Read the full article and then we invite you to explore our website to learn how MetaViewer can increase your CCC.