There are a number of tasks that are essential to be included in any small business cash flow management system. Some tasks are daily, some are weekly and others are on a monthly basis. Defining who is responsible for the tasks and routinely checking that they are done is good management. Be proactive in knowing what cash you will need in the future. You can also get the best fractional cfo services online.
To manage the cash flow of a business, within the day to day operation, it is essential to include the following tasks:
- Prepare and review your Cash Flow Plan weekly. How much cash are you starting with, what cash is due in and what cash is due out.
- Reconcile your cash taken daily including payments received from credit cards. Monitor your internal controls for handling cash. Have different people reconcile your bank accounts and cash accounts to those who deposit the checks and cash.
- Review your Profit and Loss at least monthly. Preferably prepare your P&L in house or get your accountant to do it for you, but do not wait too long. Accounting software packages such as Quickbooks and MYOB are suitable for a range of small businesses and are easy to set up to generate P&L reports.
- Review your Balance Sheet monthly. Calculate your quick ratio (liquid assets divided by current liabilities) -should be greater than 1 and your current ratio (assets divided by liabilities) – at least 2 to 1 is good.
- Ensure any excess cash is earning you interest and is also easy to access.
- See your bank for a line of credit before you need it
A Small Business owner may wear many hats across his/her business, however Cash Flow Management is one area that the Business Owner is wise not to delegate
