How to Properly Manage Your Business’ Cash: Dos and Don’ts

How to Properly Manage Your Business’ Cash: Dos and Don’ts

We all know that managing your business’ operations properly is easier said than done. You have to be on top of every situation, every task, and every responsibility. You also have to make sure that everyone is doing what they are supposed to do. On top of that, you also have to engage in the right marketing strategies in order to make your business known. But apart from managing your business, you also have to manage your business’ cash. This is where it becomes even more difficult.

There are two basic principles that come to mind when it comes to your business’ cash management: the amount of money you have, and the timing. There needs to be the right balance between the two so you have ample time to pay all your bills and pay for your expenses whilst keeping the business running as it should.

Do keep an accurate account of your available cash

You always have to know how much available cash you have on hand. And when you think of your available cash, this only includes the money that is available and accessible, such as all your notes, coins, the money saved in your banking accounts, other deposits, and other overdrafts which are unused.

The cash you have available doesn’t include the money that is owed to your business that you do not have quick access to, such as long-term or time deposits which you cannot immediately withdraw, money that is owed to your enterprise by your customers, or assets and stocks.

Do control your business cashflow

Controlling the cashflow of your business is an obvious task and responsibility. Remember that in order for you to receive a profit, you have to deliver or produce the goods and services which you have to sell to your clients and customers before you can expect to get paid. Always have enough money on hand to pay your employees and your suppliers even when you still haven’t received your expected payment from your customers.

If you are experiencing problems with this, what you can do is avail of a factoring or invoice discounting service (such as that offered by cashflow experts like so you will always have money available for your expenses. This type of service is not only convenient – it is also very feasible and financially viable as well (and better than getting a bank loan), because the money you receive in advance will only be based on your invoices.

Don’t be confused between profit and cash balance

You should never confuse your available cash balance with your profit. Keep this in mind: the profit you make is the difference between your total earnings and your costs and expenses, and this is usually determined during a specific period or annually. You can always try to forecast your expected profit for a time period, but you may still have to deal with a period when you are lacking cash.

Do invest your available cash

If you are fortunate enough to have more than enough cash at any given time, it might be a good idea to use this cash for an investment in the short-term, or at least move it to a bank account which can give you a higher interest rate. This way, you can maximise the profitability of whatever extra cash you have available. It is also important to choose your bank account wisely – for this, you can also seek help from professional financial advisers or your accountant.

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