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Question 2 High receivable turnover days are one of the major causes of insolvency. Cash...

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Accounting

Question 2 High receivable turnover days are one of the major causes of insolvency. Cash flow planning involves making sure that a business generates enough cash to be able to pay day-to-day expenses. For example, many manufacturing businesses have a cash cycle. They buy raw materials and parts on credit and then manufacture goods, which they store as stock. They then sell these goods on credit to customers. In the meantime, they have overhead expenses and a workforce to pay. A problem for traders is that they expect credit customers to pay on time. This provides the cash to continue the credit cycle and to pay wages and other outstanding bills. Unfortunately, the cycle often breaks down because very often credit customers are slow to pay. This leaves the manufacturing businesses with a cash flow problem and increases its receivable turnover days.

Based on the information above, recommend six different strategies that manufacturing businesses can implement to reduce its receivable turnover days and solve cash flow problems.

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