Start by knowing who you owe.
Most people assume that businesses know their obligations. Unfortunately that is not always the case.
For a business to plan and manage its resources it must measure and track those resources. Business goals should be measurable, measured and aligned with the compensation and other rewards of the firm. Managing cash must be a communicated goal of the firm and cash must be tracked and projected.
Firms delegate the responsibility to purchase goods and services to a number of people. Purchasing managers buy materials, shop floor managers control the labor force size and hours, owners and managers control capital spending, maintenance personnel make repairs and order supplies, administrative personnel purchase office supplies, drivers fuel company vehicles and recommend equipment repair, and the list goes on.
In smaller firms, often the owner who must ensure that sufficient cash is available to meet the firm’s obligations.
If an organization wants to manage its cash, all those who make purchasing commitments must tell the owner and the financial team what to expect to pay. The owner should add to that other predictable expenses such as regular tax payments, lease payments and insurance. The data communicated must be organized into information that the owner or their financial people can use to forecast. Armed with information about cash flows, lines of credit can be scaled to smooth out the cash needs for the company. When a company approaches its lender with a documented history of cash flows and a forecast of future cash needs, the banker is much more likely to lend to the company, because the forecast shows financial discipline.
B2B CFO® has over 200 experienced chief financial officers who stand ready to help businesses improve their cash management processes, plan and forecast cash and build strong relationships with bankers.