MDT Business Consulting

What is Cash Management

  1. Cash Management is a broad term that covers a number of processes and tools that help businesses collect, manage, disburse and invest (on a short term basis) the cash generated by their operations.
  2. Manage the cash balances in such a way as to maximize the level of cash not tied up in accounts receivable, fixed assets or inventories.

Benefits of effective Cash Management

  1. Liquidity.
  2. Productivity - when cash flow is under control, you’ll actually spend less time managing business finances such as accounts receivable, accounts payable, and bank deposits. This can free up more time to devote to key accounts, customer service, and new business development opportunities.
  3. Ability to re-invest in the business.
  4. Ability to minimize debt.
  5. Ability to help ensure the ability to meet obligations to employees, vendors, clients and stockholders.

Are your Cash Management systems working effectively

  1. Are your accounts receivable too high?
  2. Do you invoice quickly and accurately?
  3. Do you issue too many credit notes?
  4. Do your contracting terms (T&C’s) include favorable billing points and payment terms?
  5. Are your inventory levels too high, slow moving/obsolete items too high?
  6. Do you take advantage of bank supplied tools (lockbox, positive pay, sweep accounts, controlled disbursement accounts)?
  7. Do you have to borrow funds for routine working capital?
  8. Do you have to factor receivables?
  9. Do you vet customer and supplier creditworthiness?
  10. Do you have mutually satisfactory payment terms with suppliers?
  11. Do you consider Cash Flow in your Budgeting/Forecasting process?
  12. Do you have collection issues; slow payments, bad debt write-off’s?

Approach to improve your Cash Management

  1. Develop an understanding of what is currently in place.
  2. Develop an understanding of what would be appropriate, including both in-house systems & tools as well as 3rd party solutions (i.e. your bank, “eInvoicing” suppliers).
  3. Develop a Gap Analysis.
  4. Develop a Plan to close gaps.
  5. Ensure buy-in and training.
  6. Implement the Plan.