Cash Management – How To Make The Most Of Your Cash Flow

Cash Management – How To Make The Most Of Your Cash Flow

by Paul Forrest on 3 Apr, 2012


Cash flow is the lifeblood of business. From the one-man-band sole trader to the Multinational Conglomerate, any business owner will recognise the importance of good cash flow management.

The two key factors in ensuring a business is well managed financially are:
1. The Financial Institution that you choose to handle your cash management services;
2. How the business management team takes care of its daily cash flow.

Financial Institutions

There are any number of financial institutions who claim to offer sound cash management services. The business owner needs to be sure that the bank that he or she chooses is strong and trustworthy. Some of the services that a reputable financial institution would be expected to offer are:
• Online services. Today’s entrepreneur demands that his or her requirements be met swiftly and comprehensively. Electronic transfers that can be completed by the customer using their own computer or hand held device need to be processed immediately and with a high degree of online security.
• Payment solutions need to be flexible and to be able to handle domestic and international currencies. Whether in single or bulk payments, incoming or outgoing, payment solutions should meet the customer’s demands.
• International payments, whether through bank transfers or direct debits, should ensure swift and secure settlement.
• Cash sales should be serviced efficiently and securely. National networks of high street banks and regular secure courier collections can help today’s businesses to maintain profitable cash flow management.

Business Management Team

The business owner needs to keep a firm hand on cash flow management. Some of the day-to-day activities that can be monitored include:
• Financial Projections. Changing trends in consumer and business-to-business markets can make it difficult to keep a grasp on budgets. Wherever possible, companies should forecast projected expenditure and income for at least the next twelve months.
• Contingency Plans. Even the most meticulously planned budgets can be subject to unexpected shortfalls in income or increased expenditure. It is wise to provide financial projections for both best and worst case scenarios.
• Minimise Expenditure. It can be tempting for business owners to spend freely in order to service their enterprise. Prudence is needed when seeking business accommodation or furniture, for example.
• Stock Levels. Business owners should not be over-optimistic when buying in stock. Short-term needs should be borne in mind as opposed to tying up essential cash flow in slow moving items.
• Leasing versus Buying. Many essential business items, such as furniture, vehicles and electric equipment can be leased
• Staffing Levels. Staff costs, including salaries, pension and holiday provisions, are generally the highest item of expenditure on the balance sheet. Clearly, businesses need to attract the right kind of employee for the job. Key positions will require staff who are well qualified. This comes at a price. Bosses need to look at the possibility of short-term contracts or even temporary positions for general staff.
• Drawing a Salary. The business owner needs to be careful not to take too much money from the business. Some new business owners can be tempted to award themselves unsustainable payments based on over-enthusiastic projections.
• Customer Payments. Smaller businesses, in particular, have been known to be forced into liquidation by an unreasonable level of customer debt. Payment terms should be agreed at the outset. Slow paying customers should be encouraged to pay earlier by offering some kind of concession.


Choosing the correct Financial Institution to service a business’s Cash Management aligned with some good housekeeping on behalf of the company Management Team should go a long way to helping a business to keep control of its cash flow and subsequent profitability.

About the Author

Paul Forrest

Paul Forrest is an experienced writer in many fields of interest and we are delighted that he will now be a regular contributor to in 2012.