Cash Management Basics
Cash is your business's lifeblood. Managed well, your company remains healthy and strong. Managed poorly, your company goes into cardiac arrest.
If you haven't considered cash management an important issue, then you're probably undermining your business's short-term stability and its long-term survival. But how can you manage business cash better?
Start with understanding how good cash-management practices can influence your company's growth and survival by reading "The Art of Cash Management," Inc Finance Editor Jill Andresky Fraser's classic article on the topic. Then dive into forecasting your business-cash needs and learning how to handle a cash crisis. Assembled here are practical pieces of advice, tips and tricks from CEOs, and tools that you can use to get a handle on business cash.
Handling and Avoiding Crises
- How Do You Define Cash Flow?
- If your definition of cash flow is flawed, and you're not tracking the right numbers, you may grow your company right into a cash crisis.
- The 10 Absolutely Must Follow Cash Flow Rules
- Everyone wants cash on hand at all times. Here are 10 rules to help you get there.
- The Magic Number
- Every business has a magic number. By employing his, our columnist didn't overstaff this year.
- Riding the Economic Roller Coaster
- Tighten your seatbelt. Surviving the ups and downs of the world economy means keeping an eye on business finances.
- When a Cash Crisis Strikes
- Credibility with vendors, bankers, and other creditors is built slowly, but can be destroyed quickly if your company falls behind on payments. Know how to break the bad news to preserve your business's relationships.
Hot Tip: Prepare for a Cash Crisis
How do you prep for a cash crisis? Wayne Karpoff, president of Myrias Software Corp., knew cash would be a problem late last year. His 15-employee, $1.5-million company dropped selling its products and became a full-time service business. So he built a contingency fund into his annual budget -- an amount equal to three months' worth of payroll. He got the idea when his bank suggested he set up a contingency fund to safeguard his mortgage payments in the event he found himself out of work. He dipped into the fund three times last year to float the company during project and payment delays.
Source: Ilan Mochari, Inc magazine, March 2000
Forecasting, Projections and Budgets
- The Secrets to Formatting Cash Flow Projections
- Here are the keys to creating a powerful tool to take control of your cash flow.
- Cash Flow Projections Made Easy
- Here is a 4-step process you can use to create cash flow projections you can trust.
- Breaking Free from Budgets
- Exasperated by budgets that hamstring creativity, a growing number of companies are tossing off financial constraints--and still holding the line on spending.
- Budgeting for Blunders
- Lisa Hickey created a fund to support creative risks her Boston-based ad agency, Velocity Inc., takes when trying innovative ideas that might not pan out.
- A Passion for Forecasting
- Don't put together an annual sales forecast using only gut instinct and wishful thinking! Here are some rules you can follow to create a forecast that you and your employees can count on.
- Action Plan: Forecasting and Cash-Flow Budgeting
- Developing a budget is simple, and when created with solid sales and expense forecasts in mind, you can ensure that your budget will stand up to the daily demands of your business. Here are some steps you can take to create a cash flow budget you can rely on.
- Defining Key Financial Ratios
- Tracking these key financial ratios will highlight financial trends in your business.
- Financial Ratio Worksheets
- Use these financial-ratio worksheets to determine 10 key ratios and track financial trends in your business.
- A Simple Formula
- Determine your breakeven point with this online calculator.
- The Employee-Run-Budget Worksheet
- Help employees get in on the budgeting act with this worksheet.
- Profit-and-Loss Projection
- Use this profit-and-loss projection as a guide to projecting your company's profitability.