Mastering Cash Management: Key Strategies for Business Success

Mastering Cash Management: Key Strategies for Business Success


Unlocking Business Success: The Art of Cash Management

Running a business is no simple task.

Between gathering the initial funding and research to get your business started, training your team, and working to out-sale competitors, there's a lot to do. Not to mention all of the money that goes into keeping the company going.

Whether you're paying out funds or receiving money, you need to be well aware of how all your money is coming and going. That is why every business should perfect its cash management strategies.

Without cash management, you're risking all the capital you've built or are working to build.

Here's a closer look at how cash management works and why it's so important.

What Is Cash Management?

Simply put, cash management is how professional organizations collect and use their cash. The tactics and processes they implement to do so are called cash management strategies.

There are two basic ways to consider the cash a business has - cash in hand and cash flows.

Cash in Hand

Cash in hand is what is already in your company's name.

It is cash that is sitting in all of your bank accounts and other resources. This term also includes any cash that's in your control - like money that maybe you take to trade shows or reserve for giveaways.

Cash Flow

Cash flow is the tracking of all the cash that is not in hand, but that you're still responsible for. The best way to think about cash flows is in terms of accounts payable and accounts receivable.

Your accounts payable is all the money that you owe. This may be in terms of payroll, investments, contracts, and subscriptions to certain services that keep your business running.

Accounts receivable is all the money you expect to become cash in hand in the near and far future. This is how businesses track debts they need to pay, as well as reoccurring payments that are part of contracts and/or partnerships.

Together, the understanding of cash in hand and cash flows creates cash management strategies. Businesses use these strategies to monitor all the comings and goings of financial resources, as well as the available investment opportunities.

There are many ways to approach such a task. Below are some of the fundamental principles.

Basic Cash Management Strategies

It's one thing to know how much money your company has in the bank and another to know how to make the most of it. This is where cash management strategies come in.

The better you know how to work your money, the more efficient your cash flows will be, which results in higher amounts of cash in hand.

A few simple rules to follow include:

Plan for the Short- and Long-Term

You're probably already well aware of the things you have to pay out this month.

Such expenses include everything from payroll to the rent for your office and the internet and cable use there, too. Other regular payments may be resources you have contracted but not on the payroll and things like web hosting subscriptions or security systems you have in place.

These all repeat every month of the year. However, there are annual expenses to consider when planning your cash management strategies, too.

Examples of these payments may be business taxes, yearly subscriptions instead of monthly ones, and end-of-year bonuses or business upgrades.

Speaking of upgrades, always be one step ahead of your resources.

You should know when you'll need new equipment. No matter your industry, there is something that you will need a new model of when the time comes. Don't let that time sneak up on you - plan for it now so you can pay for it without stress later.

This could be for new machinery or software that is relevant to your line of work. Other long-term things to account for might be moving into a new office space, planning a company retreat, or bringing in more talent.

All of these things are for the good of the company, but they start with the company's financial liberty to make such investments.

Keep in mind, when thinking of the long-term, it's a good idea to break it down. You should plan for the next year, the next three years, and the next five years, for example.

Monitor Your Accounts

How do you make sure the cash management strategies you've set in place in your budget actually happen? By monitoring your accounts on a regular basis.

You can't just walk away from the short- and long-term plans that are accounted for and think everything will go as predicted. Something always comes up.

There could be an investment opportunity that arises sooner than expected, for which you'll need to alter calculations. Similarly, if a piece of equipment is broken or a person on your team leaves the company, you'll have some new expenses to account for.

These are just a few examples of what can happen in the world of business. With proper planning - as well as monitoring - you can ensure you're always prepared.

Always Keep the Bottom Line in Mind

No matter what your financial goals are, or how you adjust to achieve them, there is one thing to consider above all: the bottom line.

If you aren't making money and spending it wisely, chances are, you're losing money. That's a big risk to your business. It affects how everything else that you currently do operates, and what kind of opportunities you can take on in the future.

Thankfully, that is why cash management strategies are in place.

The better you implement them, the less you have to worry about your bottom line. Cash management ensures you're in the green, or at least heading there if your business just started and you're still in the negatives.

Either way, this is a must-have business tool that you can't risk overlooking.

Cash Management Made Simple

To make sure your cash management is stable and efficient, you need the right business tools. There are plenty of system and software options out there to help you.

But, you should always have a calculator handy, too.

This helps you track and check the numbers you've predicted. To stay sharp, you need the best calculator out there. Click here to find the perfect one for you.


Jan 15, 2018 Monroe

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