For some of you next few days will either be frantic or quiet, depending on business you are in.

I hope those of you who are quiet are spending your time wisely planning what you want to achieve for 2005.

For rest of you no doubt, January will be time when future plans will be made.

Regardless of when you do it, you need to plan where you want to be personally and professionally this time next year.

If there is no planning or goalsetting, you will continue to meander along and take what life dishes out to you. You'll be reactive, not proactive.

When you know where you are going, you can work out steps to get there.

Do a Personal Stocktake Write down answers to these questions:

What have I achieved this year? What do I want to achieve by end of 2005? What skills, courses, people do I need to help me reach my goals for next year? List specific ACTIONS you need to take. Plan in your diary when you will carry them out. This last step is very important. You can have all great intentions in world yet if you don't commit specifically when you are going to act, your goals may end up being wishful thinking and never eventuate.

If you are a leader in your organisation, do same exercise with your people.

Part Two of Cash to Cash Cycle Series

Part One: Inventory

Next Week: Sales

We’ve already found $250,000…so let’s find another $250,000…

Laying Foundation

Last week, we raised question: what would your business do with $1,000,000? To lay foundation we introduced inventory as first of four areas that will lead toward our million dollar goal. And you saw exactly how to achieve first $250,000 in cash savings by avoiding delays with an increase in velocity, as well as an increase in discipline and competency. But how exactly? With time – as you saw with inventory and as you’ll see this week.

Tackling Accounting Procedures

Let’s continue that crucial theme of time with another major source on your balance sheet – specifically, accounts receivable (A/R). If you have $500,000 or more in accounts receivable then STOP! We have found it again.

Reducing Average Days Collection

Why? Because if we focus on reducing your average days collection by 50%, then your accounts receivable balance will fall to $250,000 and result will be an extra $250,000 in your bank account. And just like that, we’re halfway to our $1,000,000 goal.

So now, let’s see how this actually works in a real-life business scenario.

Accounting Procedures Service Business Example

A service organization with $700,000 in average A/R balances needed assistance. So we examined their A/R function to understand and quantify workflow and workload issues. Then we designed and implemented a process to improve A/R performance.

The metrics we developed reduced their “over 60” accounts receivables by 85% and their overall A/R balance by 50% within 90 days of implementing new procedures. With these new processes and reports, company now tracks Average Days Collection and past due rather than just Days Sales Outstanding (DSO) as measure of their collection effectiveness.

The result: an extra $350,000 in cash. And, again, we explicitly see crucial role of time and how an increase in velocity and discipline directly yields an increase in efficiency and cash savings. So how can you use time to your advantage?

Methods to Design New Accounting Process

Decrease collection cycle. Examine customer accounts that go beyond your terms. Do not wait until twice net terms to take action.