Whatever actions you decide to make, it is essential to act early and execute strong decisions to build up the necessary momentum to have a positive impact. One of the biggest problems in making significant changes to any established business is that when changes are made, there is usually a lead-time of some months before any positive effects can be observed (____ insert). Based on the analysis earlier on, I have set out an actionable plan on 3 significant areas for you to focus on which will hopefully reduce your overdraft and make your business more efficient.Cash Flow Analysis and Forecasting: The Definitive Guide to Understanding and Using Published Cash Flow Data 1-119-96265-X; 1-119-96874-7 Year: 2012Optimise on Assets:As shown through our ratio analysis, your company is having some efficiency issues and I think it is essential for you to release any cash which is trapped in our balance sheet and ensure you are making the most of all your asset holdings.https://www.

entrepreneur.com/article/187606Assessment on Overhead costs: Firstly, I would try to assess your overhead costs and see if there are opportunities to decrease them. Lowering overhead has a direct impact on profitability and should help us build up some cash. Overhead expenses, including rent, advertising, indirect labour and professional fees, are indirect expenses that you incur to operate the business outside of direct material and direct labour.Asset Productivity Report: Secondly I would run a check on the productivity of your assets and sell off ones which are not benefiting you. You are holding inventory for over 3 times as long in 2017 than in 2015 and have increased your inventory by 7.5 times! Even though this could be a sign of growth and expansion, It’s essential you make some significant actions to impact your negative cash flow. Any assets which have just been sitting in storage should be sold for more cash.

It is better to improve your liquidity than hold them as excess stock.  If we can improve in this manner, we will be in a more healthy cash position and have great effect ony your Core Liquidity ratios.Additioanlly this will also deliver an improved operational efficiency. Faster conversion cycle of accounts receivables:Being a Sports Manufacturer it isn’t uncommon for payments to be held up for long periods of time which would cause an increase in the time taken to receive your cash. However, this process has made your cash flow cycle extremely tight. Instead of having healthy cash reserves to invest in opportunities which would grow your business or increase divdidentss to please investors, your money is being held up with customers.

Additionally, Studies have shown that the longer receivables go uncollected, the less likely you are to get paid at all. Know both of these facts, I have collated my research into a 3 step plan for you to follow: Building an organised framework: A great way to build the necessary frameworks is to produce an A/R ageing report which will track and measure the payment status of all your customers. Accounts are broken out by the number of days since the invoice was issued (such as 0-30 days, 31-60, 61-90 days, and beyond 90 days) and the amounts due.

This way, you can spot potential collection problems early, before accounts become significantly past due, and focus your collection efforts more efficiently. Deloitte have produced an report the biggest organisational concerns when it comes to accounts receivables so I formulate a list of 4 things to watch on.https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/finance/ca-en-FA-strategies-for-optimizing-your-accounts-receivable.pdfIncentivise early payments:Having some reward for early payments could be a great way to reduce your receivable days. For example, customers will receive a 2 percent discount if they pay within 10 days, instead of 30. While there is a cost to your business in offering such a discount, the cash flow boost it provides could make it worthwhile.

Be more firm on payment deadlines and terms:Right from the beginning the terms of payment have to be made clear so as to get credit period as low as feasible. Start with a gentle reminder that payment is now past due — this is usually sufficient to prompt most clients to pay right away. Firmer communications may become necessary if payment is not forthcoming within a reasonable amount of time, including dunning letters informing clients that legal action may commence if payment isn’t received by a certain deadline.

In this scenario, you could offer the client a payment plan for the amount that’s past due. If so, be sure to put the plan and its terms in writing and have both parties sign it. And make all future sales COD until the past-due amount is paid in full.Improve Balance Sheet efficiency:Efficiency ratios are not looking good,Lots of current liabilities,  Current ratio and acid ratio and balance sheet all show this. Concerns: will they be able to pay these back soon? Not in cash, they will from overdraft. Leads to another concern: will they be able to pay back overdraft (payable on demand)Sweep bank accountsFacility of sweeping should be availed in the bank accounts which almost every bank and the financial institution are providing. Sweeping is a facility by which excess fund are transferred from current account to another account which fetches interest on that fund.

At the same time, these funds are available to use when required.Negotiate for Longer Payment Cycles:As seen in our ratios payable dats Some vendors are quite finicky about being paid quickly. But others are not. Try and negotiate longer payment cycles with them. Get them to give you discounts. You can hold on to your money longer and also pay a little less than what you would have had to previously.Since they concern the short term, they are harder to solve and require urgent measures to fix when they are in trouble.

Businesses have gone broke for lack of liquidity.https://www.invensis.net/blog/finance-and-accounting/5-ways-improve-liquidity-ratios/Reduce Dividends


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