Cash Flow Gap

The cash flow gap refers to the time interval between the date when a business pays cash out for the purchase of stocks or wages, and the date it receives cash from customers for the same purchase and services rendered.

The larger this interval, the greater the cash flow gap in your business can be.

The key to managing your cash gap is to reduce your receivables period and days. Or increase your payables period. In other words, you want to get cash out of purchase made quickly, while delaying payment to suppliers if possible. Issue your invoices promptly. The longer you wait to issue them, the longer you’ll wait to receive payment.

It’s also important to not keep excess or unnecessary amounts of stock. This ties up your cash and leaves you more vulnerable to potential gaps. Explore efficient stock management operations. Base decisions around improving the efficiency of your cash flow in your business.

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