For a good twenty years, I managed cash daily, weekly, monthly and quarterly at the privately held companies I worked for. Consistently working cash flow so we were prepared for anything.
Step two for managing cash is using a weekly cash management
tool.
This is a 52 week spreadsheet that tracks cash flow going in
and coming out of your bank accounts. General checking, payroll account (If you
have a separate account) savings account, and line of credit. In addition, this
spreadsheet tracks accounts receivable, account payable and any credit card
debt you may carry.
Using this tool will have you looking at your accounts
consistently and allows you to manage and plan, when you need to borrow
from a line of credit, pay down the line, and or transfer money into savings.
We have a savings account for the gym and we sock $500
each month to cover the semi-annual real estate property taxes. In addition, if there is a little cash left over we
will put additional funds aside to cover new equipment for the gym.
You can purchase the weekly cash management tool to your
right for $175, equal to $3.37 a week, which is equivalent to less than one Grande
latte.
Why manage cash weekly? This is the path that provides knowledge
and direction for your financial goals for your business. This is so you see
where you have been, know where you are and plan where you are heading at all times.
Knowledge is power. Mapping out cash coming in and going out weekly, allows you
to see and plan what is needed.
A question I am constantly asked - Why do I need to manage
cash flow daily when I use QuickBooks.?
Great question - the answer - CASH is KING. It is the lifeblood of every business. If
you don't manage the cash coming in from accounts receivable and going out, accounts
payable you run the risk of putting yourself out of business. When you don't manage sales and accounts receivable
you run the risk of missing income. (See previous post REVENUE PATROL ALERT ) If you are not managing
your expenses. i.e. accounts payable you can run the risk of negative
circumstances where you have to scramble.
The numbers are only information, with that information, you make
choices and decisions how to move forward.
A short story about cash flow. Back in 2008 I was working
with a company that sold goods wholesale to large retailers. There was one company that we had to
constantly monitor as there were rumbles of bankruptcy in the air. Frightening,
especially when there was over $500k in outstanding receivables. They continued
to make promises to pay, however at the end of June we were notified they filed
for bankruptcy protection.
The good news, we had one advantage, our product the
bankrupt business was selling, was their best seller. They needed our product. I immediately created a letter to the
President of the bankrupt company stating all sales will be paid for
in advance by a wire. The President agreed. How did we do with cash flow? The cash sales from the bankrupt company provided cash in advance and funded our growth as the business grew
74%that year. You need cash to grow.
Your business will fail with poor cash flow management, so
why run the risk?
Create that new muscle, a new habit and learn how to work
your cash flow differently. As I shared in Step One, Cash happens
right now, in this very moment when you receive a payment or are purchasing
goods or services. Working cash daily and weekly forces you to look and plan. You are the CEO of your business and the CFO.
Lead your finances as you lead your business.
Remember, CASH is KING, so you need to know where you are at
all times.
Creating simple, easy baby step habits opens the door to new
possibilities for you and your business.
Next is step three - Cash Flow Management - Planning and
mapping out sales i.e accounts receivable, expenses, i.e. accounts payable and
credit card debt weekly.
Get in to action, invest in yourself and your business. Purchase
the weekly cash management tool and get cracking on managing your cash. If you
have any questions please leave below or e-mail me at
d.rosenfelt@cfomadeeasy.com
Warmly -
Debbie
Rosenfelt
Chief Heart
Officer.
