The annual report of Debenhams and other sources are also analysed to observe the facts of the company related to cash flows and the techniques of speeding of cash flows. The cash flows of the company like other retailing companies witnessed a decline in sales which also decreased the net cash flows of the company due to the global financial crisis and credit crunch. The company’s highest cash outflow was witnessed in capital expenditures and inventories and the inflow were dependent on the volume of sales both from stores and from online shopping through Debenhams Direct by local and international customers of Debenhams. The cash cycle of Debenhams also includes three elements of inventories, accounts payable and accounts receivable. As the sales of the company are the main source of cash inflow for the company and the reduced inventory frees up a substantial amount of cash, the company tries to increase its sales not only through its department stores and Desire stores but also through the online portal Debenhams Direct. Unlike Marks and Spencer, Debenhams pays its suppliers and creditors after a 60 days period which is almost double the time of Marks and Spencer. According to the annual report of Debenhams, the time between supplier invoices and actual payments for 2008 was 58 days and for 2007 it was 57 days. This indicates that the company has managed to increase the time of payment by one day and compared to industry practices 58 days for payment of accounts payable is quite efficient.
The company also increases the speed of cash inflows by implementing various techniques in the overall collection structure. All major credit cards are accepted at all outlets while debtors and customers are provided with the facility of paying cash at all outlets as these outlets also serve as collection points. The short term cash requirements of the company are financed through a £250 million revolving credit facility which expires in 2011. The receivable management in the company is quite effective as most sales are made on basis of cash or credit cards and credit sales to customers are made with a background check and the credit history of customers is verified before sales but it is to be considered that receipts on some receivables may be delayed and affect the cash inflows of the company. The company does not utilise its financial instruments and noncurrent assets for operational purposes but can sell off these assets in case there is a significant shortfall of cash (Debenhams 2008).
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