4 Key Components of an Effective Cash Flow Management Process

Business owners, especially small business owners, need a cash flow management process in place for their business. It is critical to know how much money comes in and how much money goes out so you can increase your success and avoid failure. You can set up a simple & easy cash flow management process by utilizing an Easy Money Management System.

Your Money Management System can be done electronically on excel or Lotus 1-2-3 software or through using a manual ledger/spreadsheet. No matter which method you use, your money management system must first include:

Key #1, which is having an organized filing system.

This filing system is where all your physical documents and statements of your income, expenses and any business related documentation should reside. Your filing system is of major importance because every transaction expense you have for a business must be documented. You have to have some form of documentation (back up) for that expenditure, as this is a requirement for tax preparation.

Your documentation enables you to prove to the IRS that you truly bought or purchased the expenditure in question, thus providing proof if you should be audited by the IRS (if here in the USA) or your government taxing authority. Your business must provide these physical documents, so include them in your filing system from day one.

What are the other key components needed in your Cash Flow Management process? There are three more key components you should include. Let's look at each component in detail.

Cash Flow Management Component #1: You need a monthly expense report. This report would include your daily payment (purchases) activities. If you purchase something for your business then you would document the purchase in your expense report. You would document what the expense is (if it's office supplies, phone expense, marketing expense etc.), where you bought it and how much it cost. This information should be recorded in your Expense Report for that Month.

Cash Flow Management Component #2: You need to have a monthly Income Report, which will show your daily sales activity information. You will need to keep track of how much you sold each day. Record this information in your monthly income spreadsheet. Make sure that for each sale you record the date and how much income your earned for each income transaction. Many Internet marketing people use information from their PayPal and Clickbank accounts to accurately keep track of their daily and monthly income.

Cash Flow Management Component #3: You need to have a Cash Flow Management Report. This report reflects the activity you have in your business checking account(s) on a daily basis and can be easily created using an excel spreadsheet. Very much like your bank transaction register for your checkbook, but when developed for showing all your accounts (checking, money market, savings, line of credits etc.) you will get an overview of total cash available for you at any given time.

Using an excel spreadsheet is easy and an excellent format to keep track of the cash flow for your business. Follow these tips to set up an efficient and effective cash flow management system.

To Your Success In All That You Do and Dream Of...

©Kim Parsley

Kim Parsley with over 25 Years of Accounting Experience at all levels, has experienced & discovered strategies, techniques and secrets to setting up and implementing systems in New & Small Businesses. She wishes to share this with people over the world thru her works. Discover more at: http://www.EasyMoneyManagementSystem.com

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