MGT 401 Week 4 DQ 2

Accounts Receivable

Benefits:  Improved cash flow
Difficulties:  Requires more paperwork, more staff, more cash to service accounts receivable, high risk

 

Accounts Payable

Benefits:  Cash discounts for early payment, good credit standing

Difficulties:  Penalties and fees for late payments, bad credit standing or no credit

 

Inventory

Benefits:  Products on hand, repeat customers

Difficulties:  Expensive, creates strains on cash flow, costs more in overhead

 

There are several ways that entrepreneurs can avoid a cash crisis.  First, they can use the bartering system instead of using cash.  By doing this, they can trade inventory that isn’t selling for items and services that they can use, and they will not have to use cash in the process.  They can also trim costs and overhead by doing simple things like buying used or refurbished equipment, hiring part-time employees instead of full-time, leasing instead of buying, or even changing their shipping methods.


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