Cash Management: How to Turn Your Cash Management From 0 to Hero

Updated: Feb 4

Cash management is always integral in achieving economic stability.


And the sentiment rings true whether we talk about your business or you as an individual. But cash management can be tricky, especially if you have other things to focus on. Keeping your hands on the wheel becomes a lot easier if you're managing cash inflows and outflows.

Cash Management

Cash management is the systematic collection, administration, and tracking of your cash outflows and inflows. If we're talking about your finances, those cash flows mainly involve your expenses, sources of income, investments, and other things.

Similarly, for your business, cash management covers all financial factors your company deals with. That may include investments, operation costs, profit, available funds, outgoing payments, and other points of cash flow.

Managing Cash Shouldn't Be A Shot In The Dark

There's always a system behind managing cash flows. And it's not merely a shot-in-the-dark thing where you make random moves while hoping for great results. Instead, there are processes and cash management strategies you can use to gain benefits and avoid mishaps.

Importance of Cash Management To You And Your Business

Cash management is one of the ways you can employ to keep your business up and running. It allows you to keep track of what your company earns versus what it spends. And it’s always crucial to stay on top of those numbers to know where you’re at finance-wise.

If you’re not up-to-date on your company’s cash flows, chances are you may be losing money bit by bit. For all you know, you could be losing supposed profit and overspending your capital. But you may not notice it because you don’t have a clear view of your cash balances.

The same could be said for your personal finances. You may be unknowingly going over your spending limit, thinking you're still within budget. Or you may think you have the cash to spare because you don't keep track of your expenses. But whichever the case is, you're bound to lose money if you can't see the big picture of your finances.

That's where cash management comes in. We're sure you don't want to waste your money and spend needlessly. And for that to happen, you need to pay close attention when collecting and managing your cash flows.


Why Does Cash Management Matter So Much?

Again, cash management is a critical component of any individual or company's financial stability. A company that doesn't plan and handle its finances correctly will see its money vanish into thin air.


Many things can happen when you don't track your cash inflows and outflows adequately. The first one is that you may be overestimating your inflow and, in turn, overspending. You may also be allocating your budget improperly. In addition, inadequate cash flow tracking can also lead to a false sense of where you're at in terms of your finances.


An improper financial assessment prevents your company from developing optimum strategies and making the right decisions. Over time, those small miscalculated steps could snowball into huge complications that will hinder your business from moving forward.

A Visualization Of Cash Management

Money handling isn't magic.

But perhaps, there have been some instances that made you ask how things have turned out the way they did. For example, how did large corporations grow and scale? How could they build new warehouses during recessions? How could they buy properties instead of renting them, and then do it over and over again?

The first answer that usually comes to mind is that corporations make a lot of money. While that contributes to how they achieve great things, that's not the only factor responsible for their success.

Instead, cash management and treasury management are the real answers. Financially-savvy businesses earn big and then go on to increase their wealth through intelligent cash management skills. You can do this through disciplined spending, wise investments, and rigorous accounting of cash-related responsibilities.

Now, you may be thinking that financial planning and treasury management are only available to big businesses because they could afford them. But that sentiment is simply untrue.

Whether you're an entrepreneur who's just starting or you've been in the industry long, you can benefit from cash management. It can help anyone at any level — even if we're talking about your personal finances.

The fact of the matter is: everyone needs to manage money systematically to avoid losses and maximize gains. That rings true in any financial situation.

The true value of cash management lies in what it can make you accomplish, especially long-term. You'll learn how to budget, spend, account, and manage your finances well. And if you ask any successful person, they'll reaffirm the fact that staying on top of your finances is the way to go.

Cash Management As A Work Of Art And Science

The beauty of cash management lies in how it can be both a scientific process and a form of art. Like science, there's a system to it. You take calculated steps and weigh decisions carefully toward financial stability.

It's also an art form in the sense that you have to be creative about it. After all, there are a lot of factors and nuanced influences to consider when you're managing cash balances. For your business, in particular, you have more aspects to consider and balance out. You have to cover expenses for operation, investments, cash assets, capital, profit, and other financial obligations.

And you know what? Whenever you manage your cash, you can think of yourself as a mix of Einstein and Van Gogh. After all, you use both your intellect and creativity at the same time. And you demonstrate a blend of those two systems when cultivating efficient business cash flows and coming up with cash management solutions.


What's The Science Behind Cash Management?

Essentially, cash management is a process of budgeting, saving, investing, and using the money you have for your business. You need cash management to make sure you use your money responsibly.

When it comes to your business finances, there are numerous decisions to be made. A few examples are portfolio management, investments, mutual funds, pensions, and other factors involving the financial market.

And that’s the more scientific side of the process: predicting and following market values and anticipating returns on investments.

As an entrepreneur, you have your personal and business goals to ensure the company's success and financial stability. To turn those into reality, the presence of cash is a must. And you need to take it a step further and ensure that you have a solid and thorough plan for that money.

Every dollar must serve a purpose. Then, let cash management help you turn that into social impact.

Smart businesses have short-term goals — quarterly or yearly targets — and long-term ones where look five or even ten years ahead. Other objectives may range from allocating tax funds each quarter to expanding operations and opening new locations.

With cash management, you can understand your business's current cash positions. And based on your findings, you can begin to visualize what you're capable of immediately and what you could achieve in the future.

Further, cash management can help you and your team make systematic plans with calculated steps to achieve your goals. All it takes is the process of gathering financial information, reviewing the status of the company, and creating sound strategies.


What About The Art Aspect?

Your business finances don't exist on their own as a detached financial entity — they're tied to many things, both short-term and long-term. These things include your life, the people you work with, your business mission, customers, and others.

In addition, your business finances are also influenced by your purpose, personality, responsibilities, dreams, and ambitions. Cash management can serve as a tool for you to fulfill those obligations and realize those aspirations. All that while still being in touch with all the things that influence the business.

That’s the art of cash management — it’s not just a process to fulfill something. Instead, it’s both influenced by and empathic to your inspirations, the way you live, and all the lives involved with your business.

Critical Concepts Of Cash Management

We at Profit Reimagined™ want to help you explore all aspects of cash flow management and planning in greater detail. That way, you familiarize yourself with the process and its intricacies.

We mentioned above that cash management can be a scientific process utilizing forecasting and planning based on empirical evidence. However, it is also an art — every business is owned and operated by real human beings with goals and aspirations.

Understanding the empathic side of your business makes cash management that much more essential. The following are some of the most critical concepts you should learn about the process:

Accounts Receivable And Accounts Payable

To start off, take a look at your revenue. How much is your business earning, and how much do you owe in operations, overhead, and other expenses? It's necessary to monitor all expenditures and check for any unnecessary spending frequently.

These questions will give you a clear view of how much you need every month. It will also dictate the finances you need to operate and how much surplus money you have to reinvest in your company.


Increasing Cash Flow

If you start watching your business spending closely, there is a fair chance that you will locate various unnecessary expenditures. When you prevent wayward spending, you'll see an instant improvement in your cash inflow. That is a good sign that the cash flow management you do is working.

When you paint a clear picture of how to increase cash for your business, you give your company a chance to reinvest or reduce debt. Not only does that help your business stay afloat, but it also lets it improve and gain a positive cash balance.

Reinvesting In The Business

Reinvestment is one of the most important aspects of cash management for your business. It's crucial to invest in the right tools that help you grow your company or increase cash flow on a long-term basis. Sometimes, investments could even become a matter of life or earth for some companies.

Of course, you need to exercise caution when expanding, but Profit Reimagined™ can help you visualize crucial what-if scenarios. We can also provide some guidance and comfort when you need to make big decisions.

Managing Business Debt

There can’t be growth without debt. It’s a business fact that’s important for you to understand. Once your cash flow is optimized and can’t be improved further, the only option to grow is to self-finance or to go into some debt. It’s a simple risk-reward model, and you can learn more about it with help from us at Profit Reimagined™.

We understand that managing finances can be gruelling, tedious, and even intimidating. But don’t let that dissuade you from using cash management for your business.

Final Thoughts On Cash Management

Overall, cash management strategies are a work of art and science. That means it's vital that you take your cash management responsibilities seriously to keep your business running while considering everyone's ambitions.

It may be daunting at first, especially if you're a new entrepreneur or if you're handling big numbers. But wherever you are in your business journey, cash management will benefit you immensely.

In addition, know that you don’t have to be alone in managing your finances. Profit Reimagined™ can be your trusted partner in this meaningful step of your entrepreneur journey. You can browse our site or have a chat with us so we can get you started on cash management.


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