Cash Management

How to analyze and safeguard your cash

Cash Management is an accounting term that refers to the process of managing or safeguarding and tracking the cash in your business. This is essential to your business. Whether you run a little side business from home or a large manufacturing facility, you need to keep tabs on your cash. As they say, cash is the lifeblood of any business.

This process of Cash Management involves using certain tools to keep tabs on cash thru the day to day operations of your small business. It also involves learning to prepare and use certain reports to analyze cash, and find out where it's coming from and where it's going.

You may think, well, duh, it's coming from my sales. Yes, but which product or service? And which customer? Or what branch office?

If you're planning for small business growth, and I hope you are, it's best to sit down and think about these things.

Even if you think you know who your best customer is, or which product is your best seller, it's still a good idea to track the data and make sure.


Tools to track your Cash

Cash Receipts/Sales Journal

I suggest using a Cash Receipts/Sales Journal. This is a manual accounting tool that tracks each receipt of cash and breaks out the customer, the product, and the price.

All small business bookkeeping systems should use this journal, either kept by hand or within their accounting software. If you're using a basic accounting software package, the software should be able to pull this information out for you based on your invoices and deposits. Look in your Reports section, and look for Sales Reports. You should be able to run a report by customer, and by product.

Find out more about this journal here.







Cash Disbursements Journal

This journal is also a great tool for Cash Managment, as it shows you where your money is going each month. You can easily see how much you're spending for office supplies, or materials, for example. You can use this journal as a tool to watch over the costs of doing business. This journal may be kept by hand, or within your accounting software system.

Learn more about this journal here.



Cash Flow Analysis


Then, if you want more information about your cash flow, you should prepare a Cash Flow Analysis. This is a spreadsheet that projects out your expected income and expenses, and shows you whether you will be short of cash or have enough to cover your expenses.

For more on this helpful tool, click here.

Cash Flow Statement

Another tool used in Cash Management is the Cash Flow Statement (or Statement of Cash Flows). This financial report is prepared using your Profit (or Net Income), and adding and subtracting your business activity that had an effect on cash. This report tells you exactly where your cash is coming from, be it your operations, or investing or financing activities. It also tells you where your cash is going, for example investments, or loan payments, or purchasing equipment.

For more on this statement, click here.



Cash Management is greatly enhanced by using these tools.


From the Cash Receipts/Sales Journal, you will know which products or services are your best sellers, and which customers you earn the most from. This is very helpful information for making management decisions to enhance growth.

From the Cash Flow Analysis you will know how much money you need to get thru the month, and whether you have that much coming in or not. This will show you that either you have funds to save for upcoming projects, or you need to go talk to your friendly banker.

From the Statement of Cash Flows, you know how much of your money is from operations (day to day business) and how much is from you, or the bank, or your savings, etc. You will also know where you can pull money from the business or where you can invest money into your business.


These Cash Management tools provide a lot of information you can use to grow and build your business.


Looking for some quick ideas for maximizing your cash flow? Click here for more.





For some tips on growing your business, click here.