By |July 21st, 2017|Categories: cash flow|

Cash Flow Management: A Tool for Looking Forward

Cash flow management is one of the most difficult pieces of being a business owner. While budgeting works well on a month-to-month, macro-level, companies may find themselves running into problems keeping an detailed picture of their cash flow because of the nature of how most budgets are set up.

Of course, most budgets tell you the cash balance only for the last day of the month. In this scenario, Company Y is budgeting for the month of July. On the last day of July, their balance sheets state that they will have $100,000 in cash. This seems fine, but the issues begin to arise the very next day. Rent is due on August 1st, deducting $40,000. Payroll is due on August 3rd, another $40,000. Now, you’re looking at all of your accounts payable that are due, with only $20,000 left to pay them. Monthly budgeting is not setup to take into account the peaks and valleys of cash during the month, which can leave some business owners scrambling and scratching their heads, wondering how to stretch the cash to pay everything appropriately.

If you’ve experienced this issue, you’re not alone. Business owners have asked for strategies to make this problem a nonissue, and we listened. At Froehling Anderson, we are diligently working on creating user-friendly tools and templates that allow business owners to create daily or weekly cash projections, instead of a monthly overview. Hopefully, business owners will soon be able to avoid those beginning-of-the-month cash crunches and have a more accurate budget that takes this problem into account, making cash flow management easier and more true to the actual financial situation you’re in.

Our goal with this tool is to allow business owners to have a more in-depth, accurate picture of when cash is flowing into and out of accounts, bringing it down to a micro-level that will allow you to avoid circumstances where you’re scrambling to get together the cash for necessary expenses. Creating cash flow management tools is another way we can help our clients be the best-informed business owners in the Twin Cities.

About the Author: Robb Prestholdt, CPA, CMA

Robb Prestholdt, CPA, CMA is a senior manager at Froehling Anderson specializing in Business Success Services to help clients run their businesses better.