Cash Management is a critical activity for companies of all sizes, but let’s review the importance of cash management for small business. Assuring that a company has sufficient funds when and where they are needed, is a constant challenge for financial managers. When a company has sufficient cash to finance its business plans and cushion economic downturns, it can confidently focus on business operations.  But a business suffering from inadequate cash levels must constantly reexamine and modify its plans, exerting enormous energies to obtain and keep additional financing.

Creating Awareness

Stacks of penniesCreating cash management awareness is not an easy task.  There have been differences in cash management practices between larger and smaller companies.  Larger companies usually have economies of scale that justify a specialized financial function that deals specifically with a company’s cash management practices and systems.  Small businesses instinctively entrust the CFO to control whether the company will have the cash sufficient to meet needs and plans. However, many small to mid-sized companies cannot detect direct relationships between and the companies’ transactions in the accrual-based accounting records.  In today’s challenging economic environment, the organization’s ability to manage cash is critical. The Partners in our organization have vast cash flow management experience and can show how such relationships can be found, enabling the company to manage cash flows and forecast cash monthly or, if needed, weekly or even daily.

Managing Cash Effectively

Even when borrowing rates are low, small to mid-sized business owners should count on their finance team to stretch resources as far as possible.  This economizing means that a CFO should help their companies collect cash as soon as possible, keep cash as long as practicable, use all idle cash as profitably as feasible, organize their bank account structures efficiently, select cost-effective bank cash management services, and develop efficient cash forecasting  systems.  A company that manages its cash effectively can borrow less, invest more, and repay debt sooner.  Our expertise can assess the potential benefits from accelerating collections, retaining cash, and using idle cash.  We can also discuss cash management techniques that companies of any size can use to stretch their cash resources. The major areas that would be reviewed are:
  • Analyzing the Current Situation
  • Understanding the Company’s Operating Cash Cycle
  • Forecasting Future Cash Positions
  • Investing Idle Cash
  • Optimizing Float
  • Administrative Considerations:  Bank Fees and Controls
  • Cash Reporting
Would you like to talk to a professional that knows the importance of cash management for small business? Get your free Gap Diagnostic Analysis™ today and we’ll be in touch.
photo credit: Stock Photography – Canadian Coins via photopin (license)