Manage your Cash

March 24, 2010


By Diane Fries, CPA

We have all heard the saying “Cash is King” and at no time in recent history has this been more true. Cash is the fuel that runs your business, and like a car, your business will go nowhere with out fuel. You must be aware of how much fuel you have in your tank, where you need to go, and where the next gas station is.

Do you know how much cash you have?

Is you tank on full, empty? Do you know? The amount of cash you have on hand is one of the most important factors for the growth and survival of your company. All small business people know that if there is not enough cash on pay day, game over.

There are some key steps to knowing how much cash you have.

• All transactions need to be recorded accurately and in REAL-TIME

• All cash accounts need to be reviewed and reconciled as frequently as possible (NO it is not good enough to have your tax guy look at your bank statements at year end)

• Use appropriate accounting software maintained by qualified people (NO on-line banking is not good enough)

Do you know how cash flows through your business?

You must understand the efficiency in which your business is burning cash and where your next fill-up is coming from. Simply put you need to know how much cash you have, who you owe and who owes you at any time.

There are some key steps to knowing who you owe and who owes you.

• All transactions need to be recorded accurately and in REAL-TIME

• All cash accounts need to be reviewed and reconciled as frequently as possible (NO it is not good enough to have your tax guy look at your bank statements at year end)

• Use appropriate accounting software maintained by qualified people (NO on-line banking is not good enough)

Starting to sound familiar? All business must control their cash to become and stay successful. A cash control system must be implemented and maintained accurately and in REAL-TIME.

A Cash Control System

Managing this vital component requires the use of simple, well-documented control systems for the money flowing through the business. It needn’t be an overly complex system, but it must cover two categories: money coming in and money going out.

Money coming into the business includes:

• Sales Receipts

• Cash Handling

• Credit Transactions

• Invoicing and Accounts Receivable

• Collections

Money going out of the business includes:

• Purchasing

• Accounts Payable

• Inventory Control

• Payroll

There are some key steps to cash control system are.

• All transactions need to be recorded accurately and in REAL-TIME

• All cash accounts need to be reviewed and reconciled as frequently as possible (NO it is not good enough to have your tax guy look at your bank statements at year end)

• Use appropriate accounting software maintained by qualified people (NO on-line banking is not good enough)

Ok this is indeed sounding familiar. Not to over-simplify the complex issue of CASH and how it relates to your business success, but to drive home a very important message. You must manage cash to be a successful business. This important task can be accomplished easily, accurately and in REAL-TIME. To learn more contact us.

Now get back to growing your business!