Cash velocity measures how quickly cash inflows from sales, indicating the efficiency with which it is being converted from Gross into Net Sales.

Primary Implication

Cash velocity issues arise when late-paying customers are not collected.  Failure to collect your accounts receivable when due means you are allowing your customers to hold onto your money.

Slow cash velocity means you are failing to bring cash in fast enough to pay those you owe on time.

Don’t let you’re A/R Days exceed 45-days by using an Accounts Receivable Collections Process to collect the monies you are owed when they are due.

Overview

Nothing in any business happens without cash.  The velocity of your cash flowing into your business from operations sets your business’s pace (pulse).

Cash Velocity issues occur every time a business fails to stay on top of its accounts receivable.  Most of the time, it is because they don’t like asking people for money, even when it’s money owed to them.  Too many business owners find collection calls to be distasteful, so they don’t make them, even when they need to.

Smart business owners overcome Cash Velocity issues when they commit to managing their accounts receivable (A/R) collections process with great discipline.

Failure to collect monies owed to you is the leading cause of businesses unnecessarily burning through their cash reserves.