“Cash is King!” Cash Flow Management
“Cash is King!” Cash Flow Management
1. Accounts Receivables: It is very important to stay on top of your accounts receivable and collections, to make sure your cash is coming in. The formula for a healthy and prosperous business is to, “Bill out the same amount that you collect and that you book in sales.” If you can do this, then you will stay moving forward. You can have a million dollars on your books in receivables, but if you never collect it, you can actually go bankrupt with all that money in your receivables on your books. Again, “Cash is King!” not “Receivables are King!”
2. Quicker Payment Turn Around: If you want to improve your cash flow, then it is a good idea to change your payment on receivables from 30-45 days or more to 10-15 days. If you have contracts with your customers, then make any future contracts with terms of 10-15 days, not 30 days. You can make any terms you want and the client agrees to. Sometimes if you never ask a question, you never know how things can improve. By making these changes, you can tremendously improve your cash flow situation. You can also provide discounts in order to give incentive for quicker turn around on payment.
3. Bank Accounts: Sometimes businesses have many, many bank accounts. This can be very costly in fees and can present a perception of more cash than one might think. The less bank accounts you have, the more tight management you will have over your cash.
4. Bank Reconciliations: It is imperative that you do bank reconciliations monthly. Sometimes we can think we have more cash that we do, and if the bank reconciliations are not done, then we can be very wrong and end up paying A LOT of money in overdraft fees, etc. Simply put, we end up spending money; we just don’t have, because if you understand checking accounts, you know that the balance showing online in your bank account may not represent the “real” balance. Before spending, it is imperative to always know the “real” balance in your accounts.
5. Perception and Spending: If we do not do our bank reconciliations or read a Profit and Loss Statement, we can perceive that we have more money than we do and so we can end up spending too much. This is easily remedied with protocols in place, as you will read below.
6. Debit Card: If you have a debit card, in order to control your cash flow, there needs to be control on the use of the debit card. It is advised that even the owner should have controls on use of the debit card, so that there is good cash flow management. One suggestion on this is to limit the dollar amount that can be spent on the debit card, except for by approval of the bookkeeper/accountant and/or the owner.
7. Expenses: You can maintain proper cash flow management, when you have checks and balances on all expenses. So the owner and/or the accountant should be aware of all expenses before they are purchased above a certain dollar limit. Sometimes it is wise to set in place a communication protocol between the owner and the accountant, as well, so that you have good control over your cash. It is surprisingly quite common that the boss spends cash, when there isn’t enough, and had he/she just communicated with his/her accountant/bookkeeper, he/she would have saved themselves a lot of problems and money.
8. Lines of credit: This also affects cash flow and it is a good idea to also have some strong checks and balances on your line of credit, and that only certain individuals have authority to use it.
9. Times are good! It is human nature that when times are good, we have cash flowing, we tend to spend easily, and waste more. This is the time to be wise with your money, still maintain your cash flow protocols, and then when times are tough, you will have money in the bank for this “Rainy day”.
10. KNOW WHERE YOUR COMPANY IS AT! This cannot be emphasized enough. There are many small business owners out there that just “fly by the seat of their pants” and just have a “feeling” on where their company stands. They have a perception on the status of their cash. “I have cash in the bank, it is all fine!” But this is a mistake made by many a business owner. The best way to know where your company is and have good cash flow management is to understand how to read your Profit and Loss Statement (P&L Statement), and know that your bank accounts are reconciled and that you know the “real” balance in those accounts. The problem is this, when you see your bank account with $10,000 in it, then you think everything is fine, but if your Profit & Loss statement said you lost $30,000 last month, that cash in your account is simply a temporary situation and you are about to go into some hard times within a month or so of that losing month. So be sure you know how to read your P&L Statement, recognize that if you lost money this month, you will feel it in the next month or so. Do not be deceived by the present balance in your checking. Be wise and survive in all economies.
Cash is King Cash Flow Management - To learn more about this author, visit Jacquie M. Adkins's Website.
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Anyone who has been in business for any length of time has heard the saying, “Cash is King!” For such a simple saying, it carries an extremely important message. The following are ten tips on how to manage your cash flow, and keep your company healthy and prosperous.
1. Accounts Receivables: It is very important to stay on top of your accounts receivable and collections, to make sure your cash is coming in. The formula for a healthy and prosperous business is to, “Bill out the same amount that you collect and that you book in sales.” If you can do this, then you will stay moving forward. You can have a million dollars on your books in receivables, but if you never collect it, you can actually go bankrupt with all that money in your receivables on your books. Again, “Cash is King!” not “Receivables are King!”
2. Quicker Payment Turn Around: If you want to improve your cash flow, then it is a good idea to change your payment on receivables from 30-45 days or more to 10-15 days. If you have contracts with your customers, then make any future contracts with terms of 10-15 days, not 30 days. You can make any terms you want and the client agrees to. Sometimes if you never ask a question, you never know how things can improve. By making these changes, you can tremendously improve your cash flow situation. You can also provide discounts in order to give incentive for quicker turn around on payment.
3. Bank Accounts: Sometimes businesses have many, many bank accounts. This can be very costly in fees and can present a perception of more cash than one might think. The less bank accounts you have, the more tight management you will have over your cash.
4. Bank Reconciliations: It is imperative that you do bank reconciliations monthly. Sometimes we can think we have more cash that we do, and if the bank reconciliations are not done, then we can be very wrong and end up paying A LOT of money in overdraft fees, etc. Simply put, we end up spending money; we just don’t have, because if you understand checking accounts, you know that the balance showing online in your bank account may not represent the “real” balance. Before spending, it is imperative to always know the “real” balance in your accounts.
5. Perception and Spending: If we do not do our bank reconciliations or read a Profit and Loss Statement, we can perceive that we have more money than we do and so we can end up spending too much. This is easily remedied with protocols in place, as you will read below.
6. Debit Card: If you have a debit card, in order to control your cash flow, there needs to be control on the use of the debit card. It is advised that even the owner should have controls on use of the debit card, so that there is good cash flow management. One suggestion on this is to limit the dollar amount that can be spent on the debit card, except for by approval of the bookkeeper/accountant and/or the owner.
7. Expenses: You can maintain proper cash flow management, when you have checks and balances on all expenses. So the owner and/or the accountant should be aware of all expenses before they are purchased above a certain dollar limit. Sometimes it is wise to set in place a communication protocol between the owner and the accountant, as well, so that you have good control over your cash. It is surprisingly quite common that the boss spends cash, when there isn’t enough, and had he/she just communicated with his/her accountant/bookkeeper, he/she would have saved themselves a lot of problems and money.
8. Lines of credit: This also affects cash flow and it is a good idea to also have some strong checks and balances on your line of credit, and that only certain individuals have authority to use it.
9. Times are good! It is human nature that when times are good, we have cash flowing, we tend to spend easily, and waste more. This is the time to be wise with your money, still maintain your cash flow protocols, and then when times are tough, you will have money in the bank for this “Rainy day”.
10. KNOW WHERE YOUR COMPANY IS AT! This cannot be emphasized enough. There are many small business owners out there that just “fly by the seat of their pants” and just have a “feeling” on where their company stands. They have a perception on the status of their cash. “I have cash in the bank, it is all fine!” But this is a mistake made by many a business owner. The best way to know where your company is and have good cash flow management is to understand how to read your Profit and Loss Statement (P&L Statement), and know that your bank accounts are reconciled and that you know the “real” balance in those accounts. The problem is this, when you see your bank account with $10,000 in it, then you think everything is fine, but if your Profit & Loss statement said you lost $30,000 last month, that cash in your account is simply a temporary situation and you are about to go into some hard times within a month or so of that losing month. So be sure you know how to read your P&L Statement, recognize that if you lost money this month, you will feel it in the next month or so. Do not be deceived by the present balance in your checking. Be wise and survive in all economies.
Cash is King Cash Flow Management - To learn more about this author, visit Jacquie M. Adkins's Website.
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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