Cash management tips

Cash is the lifeblood of your business. Without proper cash flow procedures, you can easily bankrupt your company. Cash is one of the most vulnerable aspects of your company. Effective cash management must incorporate accuracy, completeness, authorization, existence, and proper disclosure and reporting procedures within the organization. Having a control over your cash will help management plan, forecast, and project outcomes for the future.

Here are a few cash management tips to follow:

• Know your Budget - Always budget for items and do not overspend your cash flow. Know your projections with the accounts receivables department as to your current cash flow situation.
• Invoicing. Make sure you have a good policy in place for invoicing your clients on a regular basis.
• Request a down payment. If you have a large sale or have had cash flow problems in the past; request half of the money before you complete the sale with your clients. Having large orders that are pending for long periods of time will be harder to collect on.
• Credit Card payments. The best method to have quick cash flow is request a credit card payment. The money is immediately transferred into your bank account and you don't have to wait 30 days.
• Work with your bank. Have your bank notify you of credit score changes, work on building a good relationship with your bank and don't let your loans default or have late payments.

Cash flow is the biggest factor for having a successful business. Having a well defined financial management plan will help to efficiently and effectively manage the activities related to cash in the company. Review you cash flow often, know what your accounts receivables department is doing to reduce the pending payments, and discuss options with your sales department to improving the payment at the time of the sale.

Forecast for the future cash situation of the company. If you are coming into a busy holiday season, make projections as to how much cash you expect to come in and how you plan to handle it.

Many companies struggle with collecting money from customers. Collecting past due money ensures cash flow to support growth of the company. Relying on a factoring agent to perform the role of collection is useful for smaller businesses as they have less time to dedicate toward collections.

Factoring allows a company to sell invoices at a discount and be paid a cash advance before the invoice comes due. Since many businesses monthly sales do not produce cash on time, factoring is a great method to pay wages and creditors.

One of the great things about factoring is that it does not tie up assets outside the business and does not involve repayment of debt at some future point in time. Like any other service, factoring does cost a portion of your sales. To offset the costs of factoring, many companies increase prices or look for supplier discounts.

Another great option you can chose to properly manage your cash is to open a business line of credit. A business line of credit has greater flexibility than other loan options. One of the greatest benefits to a business line of credit is that it will cover cash flow shortages and help purchase seasonal inventory or unforeseen operating expenses. Your company can also cover payroll expenses with a business line of credit.

Keep yourself involved in the financial decisions of the company. The best practice you can preach is to keep the lines of communication open. Find out where the money is being spent and implement procedures to eliminate wasteful spending.