Accounting Matters Blog

Cash is King but how do you maximize it?

Cash is King but how do you maximize it?

Do you know where your cash went? Cash management is a relentless task that requires constant attention. It is important to develop efficiency in your procedures by utilizing tools such as cash flow projections and key performance indicators as a road map for the future direction of your business. Cash flow projections are the key to making smart, profitable decisions. Well managed companies utilize these tools to proactively navigate challenges through early detection and proper planning.

To be successful with cash flow management you need to be diligent and efficient in recording information timely. In addition, below are a few tips that will help you maximize your cash flow.


Establish tools to regularly monitor key business areas and drive profitability

· Utilize cash flow projections to make wise business decisions

· Develop visibility to key performance indicators to improve working capital

· Know your break-even point and your overhead rate

· Enter transactions daily to provide real-time visibility

Know your Cash situation

· Develop a 13-week and 12-month cash flow forecast to monitor cash flow

· Know your cash balance NOT your bank balance!

· Evaluate cyclicality or fluctuations in your business and establish a proper cash reserve

Collect receivables more quickly

· Email invoices upon job completion - timely billing starts the clock sooner

· Follow-up, follow-up, follow-up - Stay at the top of your customer’s payment list

· Implement tools such as credit card processing, EFT’s and remote deposit processing

· Begin collection efforts as soon as an invoice is past due

· Make good customer decisions - avoid collection problems

Slow down payments to vendors

· Negotiate with suppliers - don’t be afraid to ask for extended terms such as 60 -90 days

· Negotiate for vendor concessions such as volume and early pay discounts (your competitors are getting discounts, why aren’t you?)

· Always take advantage of all discounts and pay when due, not before

Sell your inventory more quickly

· Maintain inventory of only your top selling items (use the 80/20 rule)

· Tighten replenishment procedures (establish pre-determined re-order points)

· Constantly monitor and regularly closeout slow-moving or obsolete inventory

· Implement tight document controls and limit access to inventory to minimize theft

Safeguard your assets

· Monitor business performance against estimates and research variances

· Understand areas of risk and establish a strict tone from the top

· Know the elements that motivate individuals to commit fraud - Pressure, Opportunity & Justification

· Evaluate new hires carefully - implement background checks

· Segregate duties and establish tight internal controls to minimize risk

Understanding the key profitability drivers of your business is essential to effectively managing costs.  In addition, preparing monthly cash flow projections are crucial to making prudent business decisions.  Incorporating these tools to improve your cash management process allows you to successfully navigate challenges and minimize cash shortages.  More importantly, it allows you to focus your talents and efforts on growing your business which is what you do best.


Accounting a la Carte can help you develop the tools you need to monitor your business and make better decisions. Take the mystery out of cash management and maximize your cash flow today!

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