How to Better Manage Your Cash Flow
Cash is king when it comes to the financial management of a growing company. The lag between the time you have to pay your suppliers and employees and the time you collect from your customers is the problem and the solution is cash flow management. At it's simplest, cash flow management means delaying outlays of cash as long as possible while encouraging anyone who owes you money to pay it as rapidly as possible.
Measuring cash flow entails preparing cash flow projections for the upcoming year, per quarter and if you're on shaky ground per week. An accurate cash flow projection can alert you to trouble well before it strikes.
Understand that cash flow plans are not glimpses into the future. They're educated guesses that balance a number of factors including your customers' payment history, your own thoroughness at identifying upcoming expenditures and your vendors' patience. Watch out for assuming without justification that receivables will continue coming in at the same rate they have recently, that payables can be extended as far as they have in the past, that you have included expenses such as capital improvements, loan interest and principal payments and that you have accounted for seasonal sales fluctuations.
Start your cash flow projection by adding cash on hand at the beginning of the period with other cash to be received from various sources. During this process you will gathering information from salespeople, service representatives, collections, credit workers and your finance department. In all cases, you'll be asking the same question: How much cash in the form of customer payments, interest earnings, service fees and collection of bad debts are we going to get in and when?
Full article available on Entrepreneur.com