How Much Money is in Your Bank Account?

How Much Money is in Your Bank Account?


Sorry to get personal, but this is important.  All the things that you do won’t matter, if you don’t have enough cash on-hand to make payroll and to pay your expenses. 

Money comes in and goes out of the business. It’s always a great day when more comes in than exits. Cash is king. Cash flow management is a simple concept - project and actively manage cash and expenses monthly, quarterly and annually.

It’s irrelevant whether your business is profitable. You must manage the expected inflow and outflow of cash in order to stay in business.  Paying your employees and the related payroll taxes in a timely manner should be your number one objective. It will be at the top of their list too.

Suppose your cash flow projection for the next two months indicates cash in of $100,000 and expenses of $125,000.  Your quarterly projection is positive with an inflow of $200,000 and expenses of $160,000.

For the near-term you have a couple of options – bring in more cash and/or defer some expenses, other than payroll and payroll taxes, until the next month. 

Businesses sell to other businesses on terms, meaning that both parties have agreed when the payment is due. The most common payment terms are 30 days or 60 days. It is usual to extend a small discount to the customer as encouragement to pay sooner, such as a 2% reduction when paid within 15 days.

In reality, not all receivables are paid on the due dates. You must monitor and collect those late receivables. It’s money that is owed to you to pay your bills.