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Know Your Cash Daily - Sep 9, 2010

Posted by: Stephen H. Mangelsen in Articles

Cash is the life of the organization. Without it, you will go bankrupt. In every organization, cash should be the number one priority, followed by customers.

You need to understand your terms of sale and your customers need to understand your terms of sale. Those terms are determined based on the margin that you want to earn. If your terms are net 30, your customer is late on day 31 and your margin begins to go down. It is costing you money to finance your customer.

Insist when you establish a new customer that you know how they are setting you up in their computer to be paid. It must be in accordance with your terms. You now can set up your known daily cash collections, and you monitor and manage it daily so you know that it happens.

Since you know the purchase commitments you are making, you know exactly what your daily cash flow is.

Cash is your most important asset. Make it your number one priority.