Advice You - Business

For many small medium sized businesses, cash flow has received and will continue to receive the highest possible attention.

Why?

Simply the cash flow is the lifeblood of the business,

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

and without a sustained positive cash flow the business may stagnate and eventually fail.

Business owners will recognize the import of a positive cash balance in their business. Decisions on new investment in

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

reas of business development marketing, staff, plant, machinery, systems and so on are much easier to take. The investment appraisal is done, an acceptable return on investment is forecast and if cash is readily

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

available to the business, the investment can go ahead.

However, a major problem for most business is the management of the cash.

The key aspects to control in the cash management pro

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ess are the cash receivable from customers (debtors or receivables) for credit sales transacted and cash payable to suppliers (creditors or payables) for purchases made.

In many instances the sales cas

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

h receivable and the purchase cash payable account for the most significant numbers in the cash flows of businesses.

This fact will be recognized by many business owners, however, taking action to ensure approp

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

iate systems and procedures are in place to adequately manage these two important cash movements may be found wanting.

For many small businesses, credit management may be a part-time activity or may not formall

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

y exist at all. The opportunist debtor, upon realizing that the supplier does not have a credit control system or one that is stringently enforced will seize the chance to delay settlement of his/her debt paymen

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

s. This is a common practice and in many respects condoned by the selling business, because generally this action by the debtor becomes ‘custom and practice’ and both parties accept payments will always be late.

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

Why do business owners accept such an environment?

The need to have cash inflows will not be underestimated by the business owner, however, the timeliness of those inflows will all too often be compromised du

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

to inadequate preparation in collecting the debt or for fear of upsetting a customer and losing a potential customer through pressuring the debtor for on-time payment.

A delay in securing payments on time will

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

adversely impact the cash flow of the business, increase the working capital, increase costs through higher interest charges or reduce the interest receivable should the business hold positive cash balances.

T

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

e often overlooked costs of late payment will erode profits and potentially jeopardize future investment in the business.

Whilst an increase in costs is serious, the shortfall in timely cash inflow may risk the

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ability of the business to pay its own creditors in accordance with the agreed terms of contracts.

Should the creditors of the business also be lax in their credit management, it may be possible to convenientl

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

delay settlement until such time that the overdue debtor cash has been received.

Unfortunately it is often found that not all creditors of the business are prepared to accept late settlements. Deliveries of ne

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

w orders may be delayed until settlement is made; credit limits may be reduced or even withdrawn. In such circumstances the business owner must find funding from some other source to ‘bridge’ the now extended ti

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ing difference between cash payments to creditors and late cash receipts from debtors.

A one-off situation may be manageable, however, if continually repeated the threat of the business downward spiraling may b

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

ecome reality. As a business grows the cash sums involved will become larger and the gap to bridge will be greater.

Most business owners will state that cash is king; however, its continual recognition in the d

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

y to day management of the business is not always evident.

Another adverse impact on the business of an unmanaged cash flow environment is the increasing time spent by the business owner working ‘in’ t

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

he business on cash management activities –typically chasing overdue monies and pacifying creditors. Time that maybe should be devoted to working ‘on’ the business generating growth to secure its future

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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I've been telling people this for several years. Why is it that we often focus on the task – solving a problem – much more that on the process?

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Advice You - Manage Your Business Cash Flow

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