In order to keep up with your cash, you will want a daily cash flow report. This is part 5 of 6 in the cash flow methods article. Cash balances are the most important item on your balance sheet. Your company needs cash to pay its obligations, payroll, suppliers, loans, taxes, etc. As you sell your product or services, the money that you receive from your customers needs to pay off your expenses. The balance that is left over is your idle cash to invest as stated in part 4.
Daily management decisions are affected by the company’s ability to receive payments from its customers. Short term and long term planning is essential, and descriptions of planning is in part 2. Reporting daily cash balances can assist you in making sure you have a clear plan for collecting and spending the cash you receive.
If you are planning in advance, you will not be swayed by the squeaky wheel. If you are not planning, you will be overwhelmed by suppliers, and banks calling for money. They will also be requesting a schedule on how you will pay the balance down. You do not want to get into this predicament.
By receiving a daily cash flow report from your bookkeeper, or accounting department, you will be able to predict with better accuracy how you will be paying your bills. Wouldn’t it be better for you to call your suppliers, before they call you when it could be too late to make a deal and get raw materials?
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