22 Nov Cash Flow Management
Cash Flow Management Overview
The accounting software controls the life-blood of the business: Cash Flow. Financial management is often the most dramatic reason for small business success or failure. Accurate bank account information helps to ensure that all transactions are being recorded into the accounting records on a timely basis, as well as offering a way to confirm those entries with a third party on a regular basis. Not completing these procedures can result in inaccurate information for decision-making purposes, overdraft bank fees, and errors in calculating income taxes due, just to name a few.
In today’s dynamic environment there are an infinite number of opportunities, as well as an infinite number of risks the business owner must address everyday. For this reason, every second that the business is not in control of the money, costs are incurred (lost interest, cost of poor decisions, finance charges, etc.). As a business owner, concern is always present for the company’s day-to-day financial health, as well as future growth and profitability. A constant challenge is to learn how to protect the company's present and future financial stability while maximizing the wealth of the company what causes the majority of the problems.
Cash flow is the number one problem facing business owners! If they understood what the ultimate consequences of their actions are, many downturns in business would not be permitted to continue. Cash flow is a symptom of other problems, not a problem in and of itself. Understand what causes the majority of the problems and take the steps to correct it.
Some of the areas to consider are FDIC insurance, large non-interest bearing account balances, accepting credit cards, and credit card fraud. There is a limit to the amount of increased cash flow possible from reducing expenses, and quite often increasing revenue results in a decrease of cash flow (because employees and suppliers need to be paid prior to receipt of payment from the customers). Looking at the business as a whole is essential. Is there a way to receive the money faster from customers, is there a way to better use the money while it is held by the business, does it make more sense to pay according to terms, or pay sooner to receive the discount? These are all issues that seem small individually, but when included in a “plan” can make dramatic differences.