Cash Management for Business


The subject is all about timing. In the long run, a profitable business will generate money. In the short term, it is trading over the previous couple of weeks and months that determine cash flow in the next few weeks. The task is to accelerate receipts and delay payments as much as possible. However , you are constrained legally, contractual relationships, good commercial practice and the pressure that your business companions are willing to apply.

Make the bank supervisor your friend

Most companies depend on mortgage or overdraft finance, so the financial institution manager is a key person with whom you must develop a strong relationship. He or she wants to receive regular management information, together with early warnings of problems, so make sure you provide that will, and check regularly that he or she will be happy with what’s being sent.

You need to understand the bank manager’s limits, in two senses:

What are the formal bank limits to his or her decision making authority.
How far can you push him or her beyond the particular nominal borrowing limits that you have been set.
You may have a very strong romantic relationship with your manager, but if he or she is not able to increase your limit without referring to higher authority, you relationship may be of limited value to you.

You should also discover with your manager any possibilities for re-financing that might reduce your borrowing costs and/or give you greater borrowing capability. Leasing or asset financing can provide you more flexibility than you have at present.

Elements of cash flow

Different aspects of your cash flow require different management approaches.


You have very little range for manoeuvre here. If a business doesn’t pay its staff promptly, its credibility is compromised, possibly fatally. You may be able to get personnel to agree to a delay in payment, possibly from mid-month in order to end-month, if they know the company’s financial situation are stretched. But you can only try this once.


It goes without saying that getting your customers to pay on time is key in order to strong cash flow. The separate content on this subject goes into more details, but you need a rigorous and structured approach to this area, combined with solid relationships with your key customers.


We couldn’t recommend a deliberate policy of paying suppliers past due. But you need to ensure that your payment procedure takes the maximum amount of credit & runs with the minimum of inefficiency and distraction. Again, there is a separate write-up which tackles this topic much more depth.


Depending on the jurisdiction by which you are operating, you may be able to lengthen the credit period for payroll taxes, sales taxes/VAT or tax on profits. You need to talk to some other finance people in your country to find out what is possible.

One thing you should never perform is simply not pay without requesting an extension. Without exception, tax specialists take a very dim view of the and are likely to bring all sorts of unpleasant consequences down upon you.

Financing costs

When interest or loan repayments are due to your bank, they have the distinct advantage they can dip into your bank account and assist themselves.
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Using your strong relationship along with your bank manager, you may be able to acquire some assistance here.

Involve others

You may not do this on your own. You need to involve your own other directors and managers within the task. Make them aware of the essential importance of cash flow and enlist their particular help. In every negotiation with customers, they should be looking to reduce payment conditions; and with suppliers to increase payment conditions. It is surprising how rarely transaction terms feature in commercial negotiations, but you need to make sure that your company is definitely an exception to this rule.

If you want to give your Directors some further incentive to work on cash flow, look up the guidelines on wrongful trading or investing while insolvent. In most jurisdictions, you can find frightening penalties that can apply to Company directors in these situations.

Watch for fraud

Any company can be at risk of fraud. You need to make sure that opportunities are kept to a minimum by making sure there is a double check on payrolls, new vendors, supplier payments and banking. It’s particularly hard in small businesses where one person really does everything, but only vigilance of this sort can protect the company.

Make sure that somebody regularly audits aspects of the accounting function, in a visible way, so that staff know they are being checked up on.

Forecast and keep track of

A weekly or even daily prediction is an essential tool to keep on your cash flow. It’s simple to build on Exceed. The trick is to check your forecasts towards actuals and ensure you learn from where your forecast is inaccurate. You may quickly come to understand the main designs of payment and be able to use them to your advantage. For example , you may find that a major client always pays you on the Wednesday after your invoices are because of. By pointing out that this is late, you may be able to get them to in order to the Tuesday before due.


Keeping cash flowing is an important task for any finance team. Utilizing the ideas in this article, you can get the timing right and keep your business afloat.

Key Points

Cash management is the indispensable task of the finance function
Make the financial institution manager your friend
Involve selling and buying departments in improving cash flow
Watch for fraud
Forecast and monitor your money performance
Steve Lloyd qualified like a Chartered Accountant and as a Financing Director he has experience running the finances of a wide variety of organisations. This individual believes that the discipline of monetary management is essential to any business yet is insufficiently understood.

Steve prospective customers the Prospero network of Financial Directors, supporting businesses on an on-demand basis. The part time finance movie director service is a brilliant solution for businesses that need expert financial management, but don’t need a full time person.
He is based in Solihull in the UK.

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