If you are in business to make a profit, successful cash management is perhaps the most important aspect of your enterprise. Sound like a no-brainer? Perhaps so. Yet, a large number of business owners don’t have a true idea of what is coming in and what’s leaving their business coffers. Avoid surprises and double-check on all the bookkeeping basics that you think are so obvious. It is better to check frequently and perhaps risk an unwelcome surprise than to procrastinate and get a devastating shock later. Here are a few back-to-basics pointers:

1. Know your business’s current cash position and develop a month-by-month annual forecast based on your business plan and projected sales for the year. Review and revise the forecast quarterly. Comparing actual figures to your monthly forecast helps you to make sure that receivables are being collected in a timely manner, and that you are in a position to pay suppliers and vendors on time. This comparison also lets you see if you are making optimum use of your float.



2. Look at accounts payable. A quick analysis will reveal if you are paying vendors too early to capitalize on your float. Do some vendors offer early payment discounts? If so, does it make good business sense to take advantage of them?



3. Review your receivables. If payments received are not keeping pace with cash leaving the business, determine if you or your staff are too reticent about pursuing slow payers. Collecting receivables on time and establishing and applying credit policies consistently are crucial to the financial health of any business. Non-payment may signal customer dissatisfaction. If so, tackle the issue promptly. Listen to the gripes and try to get partial payment while you resolve the customer’s problem.



4. Make use of your bank. Consolidate your accounts at one financial institution to gain more leverage if you need to negotiate a loan. Don’t leave large amounts of cash parked in a checking account. Make use of other financial instruments that the bank offers-money market accounts and other interest-bearing accounts-and arrange for transfers to occur when cash balances reach a certain ceiling in the checking account.



5. Find an institution that cultivates small business customers, arrange an appointment, and ask what services, account options, etc. the bank offers to assist small business owners with cash management.


Finally, if just thinking about reviewing balance sheets gives you a headache, hire a knowledgeable experienced financial officer or retain a professional financial consultant. When it comes to cash management, what you don’t know can capsize your business.
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