Readers of my article “7 Proven Steps to Manage Your Cash with Ease” asked for more details.

In case you missed that article, or need a reminder, here are the steps.

1. Do Your Bookkeeping for Cash Management
2. Find Cash in Your Business
3. Make Quick Fixes
4. Work on the Big Cash Management Ideas
5. Forecast Your Quickly and Easily Cash
6. Manage Your Cash
7. See Your Results on a Dashboard

This article is an overview on how do set up your bookkeeping for cash management success.

Instead of a checklist or a “how to” article, I will tell you how a client (Rebecca) and I cleaned up the her company books. The company is “The Spa,” a high-end day spa.

(The method is from a real client, but the name and type of company are different to maintain anonymity.)

The End in Mind

Rebecca was stuck at about $3 million in sales. Her biggest concern was running out of cash, even with a big credit line and healthy profits. 2-3 times a month she was almost out...

Sales growth at all costs? Most of the clients that I work with have great sales, are growing revenue, or could grow revenue if they had additional cash to fund the growth. At the same time, every one of my clients is struggling to manage their cash.

After doing the basics of getting their cash management systems in place I almost always recommend that they fire some of their clients.

Yes, fire clients.

Why?

Not all revenue is good revenue and not all clients are good clients.

These clients are killing the company’s cash flow and slowing or eliminating the company’s ability to grow.

Which Clients Are Hurting Your Company?

There are two types of clients that hurt your company:

Client’s that hurt your profits and cashflow

• Non-payers
• Late-payers
• Unprofitable or break-even

Clients that hurt your productivity and moral

• Complainers that are not constructive and just make life miserable for you and your employees
• “Special” clients with constant...

Getting good advice on how to implement cashflow management practices can be complicated. Improvements to cashflow management are available for all aspects of your business. The tricky part is figuring out what to start with and what practices aren’t worth the time and effort for your business.

The biggest challenge is that some cash management ideas can actually put you in a worse cash position than when you started.

Conventional Wisdom Isn’t Always Wise

You could start today by implementing some easy things that would give your business quick additional cash. But which easy ideas should you implement? More important, are they right for your business?

I’ve found articles written on each of these ideas. The authors would have you believe that each idea should be implemented by every business:

• Start charging everything that you can to a credit card. It will give you on average about 30 days to send your cash to the credit card company and not be charged any...

When people think of cash management, most don’t think about attitudes or mindset. The business owners that manage their cash recognize that faith, gratitude, and thankfulness area critical for sustaining good cash management during bad times and good.

The inspiration for this blog post came to me during the American holiday of Thanksgiving. It is a day where we focus on what we are grateful for. People who are doing well have a lot to be grateful for. People who have had a difficult year often take a step back and reflect on what went well and small blessings in their lives that make the challenges easier to bear.

So, on Thanksgiving I reflected on what I was grateful for, including my work on The Cash Management Project. I reflected on the companies I have worked with and realized that the business owners in real trouble with their cash had a lot in common. They:

• Loved their businesses
• Had serious problems with accurate bookkeeping
• Used financial reports that didn’t...

In my article “Some Bad Advice on Cash Flow Management” I mentioned that sometimes conventional wisdom isn’t very wise. In this article, I am going to bust the myth that you should always pay bills as slowly as possible and hold onto your cash until the last possible moment.

There are at least seven instances when you may want to spend your cash quickly:

1. Early payment discounts
2. Cash discounts
3. Volume discounts
4. Annual payment discounts
5. Create solid vendor relationships
6. Hire and retain hard to find employees
7. Manage your debt

Early Payment Discounts

Some companies will give you the option of either paying in 30 days or paying more quickly, with a discount. The most common discount is 2% if you pay within 10 days, but if you don’t, then the full amount is due in 30 days. This is known as “2/10 net 30.”

Why this a good deal if you have the cash to pay early? It’s like earning 36% interest on your money! The vendor is basically saying...

Most people think that cash management, cash flow, and cash forecast are the same - they are not. If you don’t know the difference, you may have a false sense of security about where you are and the progress you are making.

Even if you do know the differences between the three, you also need to know how to use them to run your business.

I’ll give you a rundown of each one, what they are used for, and some key ideas for using them to run your business.

What is a “Cash Forecast” and What is It Good For?

A cash forecast is a way to predict when cash is coming in and going out, based on your business model. I like to call this “business modeling” because it creates a sense of how your business is run. Sometimes it is also called “cash modeling.”

A cash forecast is also a predictive model of your cash-based profit and loss statement.

Cash forecasts are usually set-up for monthly calculations, which go out 1-3 years. They use cash-basis...

In my last article, “Some Bad, and Some Good, Advice on Cash Flow Management,” I told you I’d give you the details for the seven steps to implement a sound cash management program.

I mentioned that people sometimes want to move too quickly. Generally, their problem isn’t what they think it is (see my article “Keep Digging. The Problem with Your Cash Flow Isn't What You Think It Is.”)

I advise everyone to take a systematic approach.

In this article I’ll go into more detail on how to implement a solid cash management program in any company. Here are the seven steps:

1. Put your bookkeeping in order.
2. Analyze your financial reports.
3. Find and implement quick fixes.
4. Implement bigger projects. 
5. Create a cash flow forecast.
6. Use cash management tools.
7. Monitor a cash management dashboard.

Step 1: Put your bookkeeping in order. Create a solid foundation.

Most businesses without a professional controller will have significant errors in...

Businesses can only thrive when they have outstanding bookkeeping. Good bookkeeping is the basis of a systematic cash management program tailored to specific business needs. It also makes sure that the rest of the business is running smoothly because cash is available, and documentation is done correctly.

Without good bookkeeping a business will fail.

Don’t believe me? Here are the reasons that any business will fail without good bookkeeping:

1. A cash crisis is guaranteed
2. Credit lines will be reduced and terminated
3. Vendor relationships will be destroyed
4. Client relationships will be ruined
5. Constant chaos will haunt the company
6. The IRS will become a nightmare
7. Investors will sue and rebel
8. The best employees will leave
9. An owner’s health will deteriorate
10. All hope will be lost

I’ve shown this list to a few people and they think I’m being harsh. What do you think? Read my explanations and then decide…

A cash crisis is guaranteed

If a company...

My first full-time consulting assignment was for an outdoor power equipment company, we’ll call it “Bill’s Four-Season Power”, in a rural area in western Virginia. It’s the type of place that sells gas powered lawn mowers, trimmers, and lawn tractors in the summer, then snow blowers, chain saws, and wood choppers in the winter. The store was well stocked with recognized brands and they had a lot of long-term customers including a couple of local fire departments. Four full-time repair people on staff in the service department made sure that the customers stayed happy; they could repair just about anything.

Sales were good, and they were well respected by their suppliers. They had incredible credit terms with their key manufacturers. The showroom was clean, brightly lit, and had a coffee machine so people could take their time and relax while talking to the staff about their power equipment needs.

So why was I there?

“Their cash was dangerously...

Business owners with good cash management habits are more likely to have a growing, successful business. They have more control over their business’s cash and more time to grow their business by focusing on their business’s unique value-added products and services.

Here are ten (10) habits you can adopt to help put your business on cash management auto-pilot.

The 10 Cash Management Habits

1. Maintaining up-to-date bookkeeping
2. Keeping accurate books and records
3. Structuring a chart of accounts for meaningful reports
4. Measuring the impact of increasing sales
5. Using cash management tools
6. Working with a cash management dashboard
7. Addressing cash shortages immediately
8. Spending regular, focused time on cash management 
9. Maintaining a positive attitude
10. Asking for help when needed

Habit 1: Maintaining Up to Date Bookkeeping

Up-to-date bookkeeping is critical for knowing where your cash is, where more cash is coming from, and where it needs to go. In other words: bank...