Choose a business and discuss the cash cycle and how it works in your view. What are the usual opportunities in the cash cycle for improvements or problems?
In a used car business we need to be mindful of cash flow because sales are uneven and costs can be fairly constant. Revenue is based on our inventory of cars to be sold and the general environment for buying, pricing and selling that inventory.
Fixed costs are usually fairly low – utilities, insurance, and possibly rent. Variable costs are paid when we make a sale so for this analysis are relevant to operations only from the point of impact on net profits.
We can operate on a cash only basis but that will limit our sales so we usually need to align with a bank or operation to provide financing unless we wish to take on that risk and operational complexity.
If we outsource our financing then cash collection becomes much easier but we will lose an opportunity for a source of profit.
There is a little more to this but I hope you all can glean what I am looking for in this discussion.