Bev's Design Services Ltd. commenced operations approximately nine months ago. Bev, the sole shareholder and designer, organizes the hall and table decorations for a variety of functions. Bev has completed 15 contracts so far and, with wedding season coming up, has 20 more signed contracts. However, the company has no cash in its bank account and Bev has had to loan the business money from her personal funds.

For each signed contract, the company requires a $50 non-refundable deposit. The balance of the account receivable is due three weeks following the function. For the weddings Bev has serviced, receipt of the amount due has occurred on average five weeks after the function. All the decorations must be purchased about two months before the function or once the contract has been signed, whichever is earlier. The company pays for the decorations at the time of purchase. Recently, the company has learned that it can apply for an account, which will permit it to pay 30 days after purchase.

Instructions

Identify ways the company can improve its cash management practices, in particular with respect to accelerating the collection of its receivables and delaying the payment of its liabilities.