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The Ins and Outs of Cash Flow Management

small business owner working on invoices and billing
As a business owner or cash manager, you know it’s critical to always be prepared for what’s next: growth, change, and the unexpected surprises that come along with business ownership. With cash being the lifeline of your organization, handling your cash efficiently is a make-or-break factor to your success. In this article, we will explore cash management and effective cash flow strategies that can help you focus on increasing profit and growing your business.

What is Cash Management?

Cash management, also known as treasury management, is a key component of operating efficiently and maintaining financial stability. It’s the comprehensive strategy of managing how cash enters and leaves a business. Typically, the chief financial officer or business manager takes accountability for an organization’s cash management strategy. The process involves making the most efficient use of cash from planning, collection, disbursement and investment of funds for your business.

Many organizations choose to outsource part or all of their cash management responsibilities because it can help optimize time, money, and other valuable resources. Banks are a primary financial provider for cash management services.

How Cash Management Will Benefit Your Business

According to SCORE/Counselors to America’s Small Business, a study conducted by U.S. Bank found that 82% of the time, poor cash management or poor understanding of cash flow contributes to the failure of a small business (2016).

In the business world, cash is king. Proper cash management allows a business to know exactly how much cash they have readily available. Knowing this will allow you to collect as little debt as possible, leaving more control in the business owners’ hands and less authority in the hands of investors or other debtors who want a say-so in how the business is run.

 

What are some examples of cash management tools?

Payables Solutions

Payables solutions allow your business to operate faster and smarter when making one-time and recurring payments. By leveraging electronic options like Automatic Clearing House (ACH) transactions and wire transfers, you simplify the way your business handles payments while saving time and money.
 

Receivables Solutions

Speed up your collections process and quickly convert your incoming funds to operating cash with receivables solutions. Streamlined receivables options like Remote Deposit Capture (RDC) and merchant services allow your cash flow to run smoothly, giving you more time to focus on other areas of your business.
 

Liquidity Management

Optimize your working capital to get more money out of every dollar you make. With sweep accounts, excess funds are swept from your accounts to your line of credit, investment account or other internal accounts.

 

Tips for an Effective Cash Flow Strategy

Icon for Tips for an Effective Cash Flow Strategy
Icon for Tips for an Effective Cash Flow Strategy
Maintaining a healthy cash flow is vital for any business. Here are some best practices to help you establish a healthy cash flow strategy:
  • Get paid quickly – Accept the payment types your customers want to use and get the funds into your account in a timely manner. Leveraging electronic payment options such as ACH, wire transfers, and merchant services will save you time and ensure a consistent receivable cash flow.
  • Establish a line of credit – A business line of credit allows you to always have easy access to the funds you need to keep your business running smoothly. You can use the funds for what your business needs now like seasonal costs or inventory, then repay and have access to the funds when you need them. Think of your line of credit as available cash for immediate needs.
  • Delay cash outflows – Pay your bills on time, but rarely before they are due. Delaying cash outflows makes it possible to maximize the benefits of each dollar in your cash flow.

Establishing efficient cash management services and strategies can yield big wins for your business. We recommend leveraging payment options to get paid faster, delay cash outflows, and hold onto your cash.

To learn more, meet with one of our experienced treasury management officers. We can help you evaluate your business priorities, discuss any obstacles in your way, and determine the best financial solutions to maximize the potential of your business.

 

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