How does your business manage cash?
Do you just look at your bank balance and hope there is enough cash
for payroll or the next check run?
I hope not!!
I prefer to update a rolling cash forecast on at least a weekly basis. Also, I believe it is critical to a small business to reconcile cash weekly (before each check run) and input payables and receivables the same day they occur. These habits are the cornerstone and foundation for proper cash management. And, in this technological era, it is easier than ever to have real-time access to your bank activity.
The rolling cash forecast will pinpoint future low cash balances to give advanced time to manage the business through that challenging period. Reconciling cash before each check run will ensure the accountant doesn’t overdraft the cash account. And entering of payables and receivables allows you to manage known near term cash sources and uses as well as trends with how quickly you pay your vendors and how long your customers take to pay you. Proper cash management techniques will keep your business running smoothly and give you advanced warning of brewing trouble.