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- 1. 14 Cash: Lifeblood of the Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Hinweis der Redaktion
- How much money is in your pocket? $10? How much money do you have in the bank? A little more? How much money does is available to your company? That’s a different story and the focus of this chapter.
- The cash to cash cycle refers to the time between paying out and receiving in cash. A small vendor may pay for his merchandise and sell it, receiving payment, the same day. Other projects, such as construction, may not receive payment until the project is finished. Or it may be that periodic payments are arranged (such as monthly) but the initial payments out still leave the company strapped for cash.
- Example How to Better Manage Your Cash Flow Measuring cash flow Prepare cash flow projections for next year, next quarter and, if you're on shaky ground, next week accurate cash flow projection can alert you to trouble well before it strikes Improving receivables Improve the speed with which you turn materials and supplies into products, inventory into receivables, and receivables into cash Managing Payables examine costs carefully to find places to cut or control them Surviving shortfalls key to managing cash shortfalls is to become aware of the problem as early and as accurately as possible
- Your view of the money in your account may not always match the bank. You may write a check and assume that money is not in your account, whereas the bank doesn’t take the money out until the check actually clears. Likewise the bank may not make your deposits available to spend for several days after deposit. Thus your idea and the bank’s may widely differ.
- An overdraft is dangerous for several reasons. It means you have overspent your account. The bank will charge you additional fees for the overdraft. Most banks will not make the check good so the vendor you wrote the check to will look negatively on the situation.
- Reconciliation is important and easy as outlined on the next few slides.
- Forecasting sales is an estimate of the money coming in. Unfortunately extending credit, or even accepting credit cards, delays the receipt of the money. Credit cards also take a percentage of each sale lower the amount of cash coming in. If a business accepts credit cards they can work with the bank to see when the money will ‘sweep’ into the account: either weekly or daily.
- Extending credit, or agreeing to bill later, always presents risks. There is a chance a customer will not pay. While they can be turned over to collections, it is still money lost. Also, even when they do pay you don’t know whether it will be today, next week, or in six months. While owners can make an average estimation, it is only an estimation.
- Estimating payments out is the other side of the equation. Most businesses can estimate monthly bills such as rent, payroll, utilities, insurance, etc… A cash schedule can be made so that you know when payments are to be expected and thus when you need to have the cash on hand.
- Example Managing Your Cash Flow Cash-flow forecast will help you predict the amount of money that will be coming into and flowing out of your business Take these steps to ensure your new business will maintain its positive cash flow Know what to expect cash-flow forecast provides a rough estimate of how much business could be expected in receipts each month, cash disbursements might be, and cash on hand at the end of each month Predict and plan for the slow times cash-flow forecasts can help predict slow seasons Make projections for the future
- Small businesses, especially those just getting started, need to control their cash expenditures. Using temp agencies to hire employees allows you more flexibility in reducing their hours. Buying inventory on consignment means you pay for it after you sell it and have that cash in hand. Barter is a trade of goods requiring no cash.