Monday, August 11, 2008

How to Convert Inventory into Cash effectively

Converting your inventory into cash is as critical a process for the health of your company's cash flow, as the process of converting Accounts Receivable into cash. The effective conversion of inventory into cash requires a methodical system that efficiently moves products from order to delivery. Without a well-defined inventory management system in place, inventory stock levels may become too low or too high, resulting in lost sales and increased costs. The longer an item(s) remains as inventory, the greater the chance for the item(s) to become either damaged or obsolete and this eventually results in an inventory write-down. Slow-moving inventory adds to a slower cash flow and consequently creates greater carrying costs that must finance the inventory. The degree of success, in converting inventory into cash, is directly related to the how well the inventory cycle is monitored and controlled.

1 comment:

Gladys Christabel said...

Converting accounts receivable into cash is a critical process in the development of a healthy cash flow.The accounts receivable cycle starts with a sales which in turn creates a receivable , and then, ultimately converts into cash.Blog was Good and also very Informative.

ultimately converts into cash.Blog was Good and also very Informative.

Effectively Convert Your Accounts Receivable Into Cash