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Cash Days - Improvement
Cash Days - Improvement
Matt Fox avatar
Written by Matt Fox
Updated over a week ago

Potential Cash Formula: (Accounts receivable + Inventory days + Work in progress - Accounts payable) x the improvement percentage

I've put a side by side view of the future numbers (left screen) and current numbers (right screen) to show where the figures come from. Both of these dates are set to June 2023 in this example (red button). Cash Days are 2.94

The balance on the balance sheet for cash days is £630. This figure cannot be seen on this screen, but rather in your accounting software. We add the actual balances from the balance sheet together (not the days you see in Clarity behind the numbers), but the actual balances on the balance sheet.

So a 1% increase is £6 because on the balance sheet the total actual balance was £630.

This number works in correlation with revenue. So a £100K improvement in revenue increases the cash days to an £8 improvement from £6.

When improving your clients cash days, the goal is to reduce them in order to get paid faster. If you can see a negative number in your clients account, this is a good thing. Negative cash days are good because it means your client is getting money in faster than they're spending. Negative cash days means the accounts payable is greater than the accounts receivable.

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