Effective Cash-Flow Control
Manage Your Cash-flow, Maximise Your Assets
Cash and credit are the power-trains of business, providing necessary working capital to develop, market, and deliver the underlying substance of the modern organisation.
The relationship between working capital and cash is undeniably important. Working capital (current assets minus current liabilities) measures how much in liquid assets a company has available to build its business. The number can be positive or negative — depending on how much debt the company is carrying. Companies that have a lot of working capital will, on average, prove to be more successful since they can afford to invest. Whereas negative working capital often means a lack of funds necessary for growth.
Cash Is The Most Important Thing
Many organisations seek to minimise the amount of cash tied up in receivables, inventory and cash. However as constraints on the availability and the costs of credit increase, it is important to maintain a happy balance between this approach and a wanton reduction in payables and the overuse of what is now effectively quite expensive short term debt.
Take Control
Setting some key objectives that can be tracked in your business accounting systems can help:
- Set realistic terms for conducting business.
- Understand what really matters to suppliers and customers.
- Use forecast tools to plan and anticipate impact on cash.
- Monitor cash collection performance by individual account.
- Use credit and cash responsibly.
- Pay suppliers and staff efficiently (and fairly).
- Trade responsibly. Don’t damage your reputation by being too tough on customers or being held a poor payment risk by suppliers.
Doing It In The Real World
One organisation doing this to good effect is Milton Keynes based employment specialist Recruitment Investment Group (RIG). Established in 2002, it has been working across four divisions spanning healthcare, energy, social care and veterinarian services.
RIG has been running an outstanding and highly effective centralised back office system based on the Aqilla cloud accounting solution. Key to the organisation’s success is leveraging an efficient invoicing process backed by robust cash collection to help free up costs and save time throughout its operations. Using sophisticated financial analysis and reporting tools and Smart-KPIs staff are able to monitor revenues and outstanding debtors at any point in time.
Save Money & Time
A modern cloud based accounting system such as the one used by RIG requires very little up-front investment and are quick to implement. Subscription fees are charged on a per month per user basis meaning a business can use the system as little or as much as needed. Once configured, no further annual support fees are incurred. Users benefit from being able to bill, track orders, collect cash, bank, budget and forecast in a secure environment 24x7.
Work With Your Bank
In Conclusion, the right system can be a big influence upon the relationship a business has with its bank. Used to good effect a business can monitor, manage and optimise all aspects of cash and in doing so provide that robust cash-flow required to fund growth.
