For many small medium sized businesses, cash flow has received and will continue to receive the highest possible attention.

Why?

Simply the cash flow is the lifeblood of the business, and without a sustained positive cash flow the business may stagnate and eventually fail.

Business owners will recognize the import of a positive cash balance in their business. Decisions on new investment in areas of business development marketing, staff, plant, machinery, systems and so on are much easier to take. The investment appraisal is done, an acceptable return on investment is forecast and if cash is readily available to the business, the investment can go ahead.

However, a major problem for most business is the management of the cash.

The key aspects to control in the cash management process are the cash receivable from customers (debtors or receivables) for credit sales transacted and cash payable to suppliers (creditors or payables) for purchases made.

In many instances the sales cash receivable and the purchase cash payable account for the most significant numbers in the cash flows of businesses.

This fact will be recognized by many business owners, however, taking action to ensure appropriate systems and procedures are in place to adequately manage these two important cash movements may be found wanting.

For many small businesses, credit management may be a part-time activity or may not formally exist at all. The opportunist debtor, upon realizing that the supplier does not have a credit control system or one that is stringently enforced will seize the chance to delay settlement of his/her debt payments. This is a common practice and in many respects condoned by the selling business, because generally this action by the debtor becomes