Entrepreneurial Survival - Essay Example

Therefore, it is important for any company to prioritize credit management and cash flow for increased profitability and survival. There are different issues involved in managing credit in a company. A company first needs to understand well the credit and payment issues of its customers before carrying on a relationship with them. It is essential for a company to identify the high risk customers in order to adopt the most effective strategy of prioritizing collections. The nature of the credit controller of a company also influences the credit management, hence it is vital that a company utilises different credit controllers.

Additionally, effective credit management involves strengthening existing customer relationships. A company could for instance renegotiate credit prices with loyal customers, among other incentives, since intuition to customer needs is an important aspect of credit management that can result in more profitability (Bullivant 2012). Having a company credit policy is critical, and this must be up to date with the present creditworthiness of specific customers of the company. Credit insurance is also important in the covering of individual accounts or the whole turnover of company (Chartered Institute of Management Accountants 2009).

The strategies used in credit management impact on cash flow. Therefore, effective credit management improves cash flow. However, there are additional factors that enhance the cash flow of a company. First, improving the speed at which goods exchange hands with the buyer is important, because the faster a buyer purchases and pays for a good, the better it is for the company’s cash flow, even as inventory must move for cash to flow. Improved technology for faster payment and delivery of goods also helps to move inventory.

Additionally, the use of information is key in improving cash flow. For instance, when delivering goods to customers, a company must track the