1, enterprise internal management
The main factors that should be considered in the internal management of cash flow cycle are:
(1) Extended average accounts payable
An effective way to improve the internal cash flow cycle of enterprises is to extend the average accounts payable related to inventory, so as to obtain more interest-free financial resources. In order to achieve this goal, the main ways are: paying raw materials, inventory, wages and other costs at the last minute, and considering paying some but not all of them to suppliers. In addition, reducing the frequency of external payment, making full use of interest-free credit cards or credit lines for payment, or not making sales commitments to the upstream before realizing accounts payable are all effective means to speed up the cash flow cycle. All these means are aimed at controlling and managing cash payments.
(2) Shorten the production cycle and reduce the days of inventory supply.
Inventory is a barometer of production efficiency. There are two forms of general inventory, one is optimal inventory, and the other is excess inventory. The so-called optimal inventory refers to "necessary inventory, which can just support the needs of production", while excessive inventory refers to "inventory that exceeds the necessary production". Excess inventory can be divided into "good" excess inventory and "bad" excess inventory. The former is inventory prepared for strategic needs (such as preventing price increase), and the latter is inventory that brings burden to the whole enterprise system. For enterprises, in order to strengthen cash flow cycle management, it is necessary to control excessive inventory and adopt effective production and inventory strategies, such as JIT distribution and timely inventory tracking. In addition, collaborative planning, forecasting and replenishment (CPFR), synchronous supply/demand planning and direct transshipment are all strategic methods to achieve a good cash flow cycle.
③ Reduce average accounts receivable.
The management of accounts receivable is also an important factor of cash flow cycle management. Compared with accounts payable, it mainly controls or restricts cash payment, while accounts receivable is to speed up the payment. In order to achieve this goal, the main measures are: encouraging fast payment, using discounts or incentives to increase the recovery of accounts receivable. Moreover, some studies have proved that poor sales performance can easily lead to arrears, so interest should be charged for arrears and such customers should be paid immediately. In addition, accepting electronic payment can speed up the recovery of funds, and at the same time, some convenient means are adopted to facilitate customers' payment, such as providing customers with envelopes with stamps. In addition, it is also a good method to entrust financial institutions to recover accounts receivable.
2. Cooperation and coordination between enterprises, including the connection between enterprises and logistics distribution centers.
Shortening the cash flow cycle not only requires internal management of enterprises, but also can be achieved through cooperation and coordination among enterprises. Research shows that compared with ordinary enterprises, enterprises with good cooperation can achieve shorter order lead time. Dell effectively informs upstream suppliers so that suppliers can deliver products in time according to Dell's needs. Therefore, the coordination and cooperation between enterprises is to break all kinds of business barriers between enterprises, improve business performance through the integration of business processes and effective information communication, thus accelerating cash flow and shortening cash flow cycle. Because of this, in the process of forming business forecast and replenishment plan on the basis of considering various customer sales determinants, the information of order forecast should be transmitted to the distribution center simultaneously to integrate and correct the order forecast and the corresponding enterprise inventory structure and level, and then combine the POS data of retail stores and supplier order forecast to effectively formulate the business and financial objectives and rules of supply chain enterprises.
3. Business planning integration will be gradually extended to operators and third-party logistics to form CTM.
Because today's supply chain runs through three parties (suppliers, transporters and sellers) and connects four industries (production, transportation, warehousing and marketing), shortening the cash flow cycle not only requires the supply chain to participate in the collaborative operation among enterprises, but also needs to extend the business integration to the transportation industry to form collaborative transportation management (CTM), that is, to transform the order forecast generated by enterprises into transportation forecast. Its purpose is to improve the service, efficiency and cost of transportation and distribution process through the cooperation among sellers, buyers, carriers and third-party logistics. Through the cooperation among carriers, suppliers and third-party logistics, and with the help of modern information system, the main management function of CTM is to shorten the planning window, rationally arrange logistics resources and establish corresponding logistics distribution services.
4. Integrate financial management and financial business to form an all-round integration of business flow, information flow, logistics and capital flow.
Cash flow cycle model is an important theory and evaluation method of supply chain logistics performance management. Its breakthrough lies not only in the integration of business plans, forecasts and logistics operations of all participating enterprises in the supply chain, but also in the integration and management of finance and financial business with the increasing complexity of supply chain management, so as to effectively protect the financial resources of enterprises, generate good cash flow, reduce financial costs and promote the smooth operation of physical supply chain. Similarly, Li & Fung Research Center draws a conclusion from Li & Fung's practice that the performance of supply chain is reflected in several aspects, such as providing products for new markets, expanding the distribution scope of products in the market, brand product sales and tally management, channel marketing management, providing market information and local understanding. In particular, optimizing capital flow (including capital acquisition and operation) is one of the main manifestations of supply chain performance. The financial and financial problems in the supply chain are mainly manifested in the following aspects: on the one hand, suppliers need to know the order situation and service conditions of timely delivery. When the ordered products are accepted by the buyer, there will be payment requirements, and the price of such payment needs to be consistent with the provisions of the contract. In addition, in order to ensure the safety of funds, suppliers need to understand financial and financial risks, understand the financial strength and financial situation of upstream and downstream enterprises, and at the same time maintain sufficient working capital to support their own supply chain operations; On the other hand, as a buyer, it needs to know its own financial situation to pay for the delivered goods, and at the same time maintain sufficient working capital to support its own operations.
It is not difficult to see that the development of supply chain management is accompanied by a high degree of financial and financial management. From the perspective of supply chain finance and financial management, the development of this field is mainly reflected in three aspects: first, how to combine supply chain integration management with financial performance management, effectively monitor various activities of supply chain operation with financial management indicators, find out the gaps, and promote the development and optimization of supply chain integration; The second is the financial and risk management in the whole supply chain operation. According to VISA's research, the financial risks that are easy to occur in the process of supply chain management include slow financial processes (caused by manual or isolated processes), unreliable or unpredictable cash flows (lack of timely information notification), high-cost process operations (lack of employee authorization and recognition), high unpaid payments (DSO) and bad credit decisions (caused by artificially setting the optimal limit), all of which need to be integrated. An integrated and automated end-to-end financial and risk management system, including the use of purchasing cards and distribution cards, the establishment of an electronic bill submission and payment system, the visualization of bills, the establishment of a supplier network port to realize bill and credit inquiry, and the establishment of a financial control system based on Internet financial reporting, which is characterized by working capital days DSO, outstanding sales days (DSO), inventory days (Dior) and payable days (DPO); The third is to realize supply chain financing, that is, to solve various problems in supply chain management such as project and order acquisition, raw material procurement, production and operation, and goods sales, and to provide enterprises with centralized business support such as credit service, purchase payment, inventory turnover and account recovery. This financing method promotes the development of supply chain. While the product form of the supply chain is constantly being transformed by processing and manufacturing, the financier actually expands the production and sales of the core enterprises by arranging preferential financing for the participating enterprises in the supply chain. At the same time, core enterprises can also reduce their own financing, directly benefit from the overall value-added part of the supply chain, and realize "zero cost financing" or even "negative cost financing". In addition, for financial institutions, the overall credit of the supply chain is stronger than that of individual enterprises in the industrial chain. The interest rate and loan percentage provided by financial institutions change with the change of production stage and adjust with credit risk. For example, in the order stage, due to high uncertainty, the interest rate is higher and the loan percentage is lower, but with the progress of the production process, the credit risk is reduced, the interest rate is reduced and the loan multiplier is increased. Therefore, the combination of risk and income is completely in line with the risk control of financial institutions and the financing needs of customers. Moreover, due to the combination of supply chain management and finance, many cross-industry service products have been produced, and correspondingly, many new financial instruments have been demanded, such as domestic letters of credit and online payment, which provide huge business opportunities for financial institutions to increase their intermediary business income.