MSME Quality Hub

The Simplest yet Powerful Business Habits Newsletter

One for Thinking

In case you are unable to pay your suppliers on time, and as a
result you do not get your supplies on time, then you have
the most undesirable constraint-CASH Constraint!

• You have cash constraint only and only if you have orders,
  manufacturing capacity, right suppliers, but you do not have
  cash to pay to suppliers, and they will supply only if they
  receive cash upfront!
• Cash shortage does not necessarily imply cash constraint.
  However if cash shortage is not managed in time, the
  organization will get into cash constraint sooner than later

One for Action

• Collect receivables early even at significant discount from customers.
• Get advance from customers by offering lucrative terms
• Sell obsolete/ unusable material even at deep discount
• Prioritize. The priority should be for balancing inventory at hand rather than continuing existing purchasing practices
• Prioritize all existing orders in ascending order of material requirement / cash required
• Evaluate sending small quantities instead of large quantities even at some what higher freight cost / ton
• Consider purchasing small quantities instead of large quantities even at some what higher cost / ton

Still have questions? Write to me…

One for Sharing

” The biggest obstacle with cash constraint is that the top management does not accept reality. There is a belief that the situation will improve if we just tighten controls to deal with this temporary situation. Owners or key decision-makers refuse to accept they have severe issues of cash. Therefore, the first step to overcoming cash constraint is to accept that it’s an unusual situation that will not go away through usual means.”― Ravi Gilani