Cash Management

On how cash management can help your business - The business world is continually evolving, but one thing remains constant: cash is still king. As a result, it’s critical to have a system that allows you to easily and accurately manage and monitor your cash as it comes in and as it goes out. An integrated ERP system makes it simple to monitor these important processes by improving your cash visibility and bank reconciliation.

Transactional Accuracy

It’s typical for companies to have multiple checking accounts. You need a robust system for accurately tracking different accounts.

In addition to accepting customer payments, you can group these payments for easier tracking. Think about your personal bank deposits. When you deposit five different checks, they each have their own line item on the deposit slip, but they’re rolled into one total at the bottom. It’s easy to lose track of these individual deposits. With a robust ERP system, you can group a single deposit for reconciliation, then drill down as needed to see the components of that deposit. When you make transfers between accounts, for example from operating to payroll, you can easily track, transfer and record the movement of money from one account to the other. And when you write checks, you’ll accurately see the disbursement of funds.

Best practices suggest reconciling your bank account on a monthly basis or even more frequently. Ideally, your ERP system has a bank reconciliation module that allows you to have your bank statement open to compare checks that have cleared, deposits that have cleared and produce the same ending balance. With an integrated system, it’s easy to reconcile your bank account. No more manually comparing spreadsheets or paper notes to your statement. You want a system that allows you to easily and electronically reconcile your bank statements.

You also need to consider the process of importing your banking information. Can you upload OFX, QFX or QIF files? With an integrated system, these files will auto match any cleared checks or deposits based on the date, dollar amount and transaction number. When it finds a match, it’s automatically cleared for you, reducing the amount of time spent on reconciliation. That’s crucial when you’re handling large numbers of checks.

A robust ERP system tracks the ins and outs of your cash at a detailed level and reconciles it, improving your transactional accuracy.

Tips for Improving Your Cash On Hand Balance

As a business, you always want more cash in the bank. A robust ERP system can help you accomplish that first and foremost by invoicing in a timely manner. Don’t wait 5 to 10 days after work is completed or an item is shipped to invoice your customers. That means you’re at least another 5 to 10 days from receiving the cash. Instead, send invoices the same day an item ships or on the same day a service is provided. There are many ways an integrated system can shorten your turnaround time if your system supports the options. Consider emailing invoices rather than putting them in the mail with a stamp. How easily can you currently email or electronically send invoices? Does your system support EDI? Do you have a reliable system for automatically generating and sending out customer statements on a monthly or even bi-monthly schedule? The key is getting the invoice into the hands of your customers’ accounts payable so money flows into your accounts receivable more quickly.

Another aspect of improving your cash balance is carefully monitoring your own accounts payable. Can you easily generate a check run based on due date while not paying any bills early? Your goal is to hold onto your cash as long as possible. You need a system that tracks bill due dates for on time payment, not early payment. When you build a check run, be sure you’re not paying vendors early. Pay bills when they’re due.

Business Cash Management and Cash Visibility

The final component of business cash management is knowing how much cash you have on hand at any given moment. You need confidence in the accuracy of the cash balance in your system. Does it properly reflect your true cash balance?

You also need to project your cash flow. When you run aging reports, you need to know, based upon due dates of your receivables, when cash will flow in. How much is coming this week? This month?

Conversely, based on vendor bill due dates, what do your cash outlays look like next week? Next month? In the next 6 months?

It’s critical to have a system where you can quickly assess the amount of cash coming in and going out.

Ideally, you want the ability to pull all of the information together into a cash budget or projection based on what’s expected to come in and what needs to go out. Where is my cash today? How does it look going forward? Are there shortfalls? Identifying these issues will help you shift money around if needed.

The bottom line: visibility of your cash is imperative.

An Integrated Solution

Cash management is the most important aspect of your business. It’s no wonder companies are seeking robust solutions to handle it. An integrated ERP system makes it simpler, providing the ability to track, manage and monitor your cash.

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