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How can I institute a Cash Management system within my business?

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You might start the process with a thorough review of your past cash management practices. How have you traditionally collected, managed and invested the cash of your business? How promptly do you collect debts owed to your company, and how quickly do you pay your monthly obligations? After gathering that information, you might proceed as follows:

• Prepare a cash flow budget for your next month or quarter: Forecast your expenses so that you can accurately assess your cash outflow for the desired period, then examine expected invoices for that period so that you’ll have a relatively clear idea of your cash inflow. That information will give you an idea of your surplus cash, if any exists, and you can then decide how you might use that cash to benefit your business. Alternatively, the budget allows you to reserve cash for a period in which cash inflow will be unusually low.

• Maximize cash flow: As part of your cash management system you should ensure that you’re paid as rapidly as possible. If you consistently allow your customers to delay payments, you’re losing the opportunity to put that cash to work for your business. Within that same pattern, don’t pay your own bills until those bills are due. You don’t want to damage your business credit rating by consistently paying late, but you’ll want to hold your cash as long as possible in order to maximize its usefulness to your business.

• Talk with your CPA and your financial institution: You probably already use a certified public accountant for your tax work, but many accountants also offer help with cash management strategies. A strong possibility also exists that your bank offers a number of cash management services that will ease your implementation of a cash management system, so talk with your bank in order to determine what specific cash management services they offer.

Next Page: What types of Cash Management services are offered by banks?

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