[Finance - Accounting] - How businesses make money..
Today, we will talk about how business make money (according to Warren Buffett)
Let's start with the question: Is there any calculation formula or tool to calculate the business cycle to generate money or not?
With the big and famous software in the world, this is too simple. But some small software, may not have this function.
So I designed this file for those who are needing it. This file has been innovated for suitable
Obviously, no matter what strategy the company is using, we need to have a measurement tool between the status quo and what we are aiming for (from my view).
Simple examples for viewers to understand are also included in the File:
- 1.1.2019 is the day the goods arrive in the warehouse
- 15.1.2019 is the day you deliver goods to customers and calculate the debt
- 5.2.2019 you collect money from customers
- 10.1.2019 you pay the supplier
So how many days is your cash flow cycle?
- Number of days in storage: 14 days
- Number of days for customers who owe money: 21 days
- Number of days in which we misused supplier money: 9 days
So the cash flow cycle = 14 + 21 - 9 = 26 days.
(That is, every money out of my pocket to buy goods, then it come back 26 days)
- So how to shorten the number of storage days?
- The number of days to collect money from customers is shorter?
- Or is the number of days of supplier occupation extended?
We also donate attached excel files to users
If you need it, please inbox to me