In the last section, we learned the benefits of cash flow management.
A few of these benefits include:
- Increasing the likelihood that your business never runs out of cash;
- Eliminating the constant worry associated with not knowing what your cash balance is right now or what you expect it to be in the near future;
- Improved relationships with your vendors because they are no longer banging on your door demanding that their past due invoices be paid immediately.
- The ability to see cash flow problems long before they can happen.
- Freedom from worry, doubt, and concern.
We then examined the top three cash flow management rules. This month we will examine the next three rules of cash management.
4) Do Today’s Work Today.
The key to keeping an accurate cash balance in your accounting system is to do today’s work today. Don’t put off what you have to do to keep the books in order. When you do this, you will have the numbers you need – when you need them.
5) Either You Do the Work or Have Someone Else Do It.
Here is a simple rule to follow to make sure you have an accurate cash balance on your books. You do the work or have someone else do it. Those are the only two choices you have. The work must be done. It’s like mowing the lawn. You can’t just ignore it. Someone has to do it. That means either you do it or have someone else do it.
6) Don’t Manage From the Bank Balance.
The bank balance and the cash balance are two different animals. Rarely will the two ever be the same. Don’t make the mistake of confusing them. It’s futile (and frustrating) to attempt to manage your cash flow using the bank balance. It’s a prescription for failure. You reconcile your bank balance. You don’t manage from it.
Pay close attention to the six cash flow rules we have discussed. Cash is a very volatile asset. The quicker you learn to manage it, the higher the chance your business will be successful.
Next time we will examine the final four rules of cash flow management.