Cash Management Techniques That WorkTax Professionals Resource
September 17, 2012 — 1,212 views
In order to ensure financial stability, all businesses must put good cash management techniques into place. Business leaders who fail to pay attention to cash management tasks may find themselves facing serious fiscal issues. Even if you rely on accounting professionals to handle the majority of financial tasks in your business, you should be actively involved in the implementation of cash management practices. Review the following techniques, which have proven effective for businesses in a wide variety of industries.
Aggressive Account Collections
If your business issues invoices to clients, be sure to collect on those invoices quickly. Many businesses are very lax about account collections. Choose invoice terms and stick to them. Apply interest and past due charges to client accounts if your clients haven't met their obligations. Of course, you must carefully balance account collections with client perceptions of your business. Create a review process to deal with clients who are having problems making account payments.
Thorough Expense Tracking
You must thoroughly track the outflow of your cash. Make sure to note and record every expense that your business incurs. You will be able to use this data in order to trim down your cash outflow. You should work to identify items that are excessive or wasteful and cut those before you cut necessary items or employee programs.
Comprehensive Inventory Monitoring
If you run a retail outlet, you must be sure to put inventory monitoring and tracking practices into place. Make sure that you can account for your entire inventory at all times. If you notice merchandise losses, carefully investigate their origins and put procedures into place to prevent loss. You should also monitor your inventory to identify products that don't sell so that you can eliminate them from your business offerings.
Solid Labor Control Measures
Carefully monitor labor costs. Allow overtime only when it is absolutely necessary. Keep in mind that it's important to monitor labor costs but that it never pays to be viewed by your employees as a cheapskate. Paying employees poorly will lead to high turnover, which can be very costly.
Strong Risk Management Practices
Evaluate the risks that your business faces so that you can prevent, mitigate and manage them. Good risk management practices can save any business from significant financial strain. If you are unsure of the risks that your business faces, hire a professional risk management consultant.