Whether you call it bacon, Benjamins, or big bucks, cash, having enough of it, is key to running your business. Below are five tips related to managing and getting the most out of your business cash.
1. All banks are not the same.
Choose your bank wisely, and don’t be afraid to switch if you need to. Banks know they have a “high switching cost,” which means it’s one big time-consuming hassle for customers to change banks.
A couple of things that are important when choosing banks (some of which we never knew to ask five years ago) include:
- Is your accountant able to connect your accounting system with free bank feeds, saving you hours and hours of accounting work?
- How automated is your bank? The more automated, the fewer errors, and the more likely the bank is to have competitive services, features and prices.
- What is the bank’s policy on holding large deposits?
- Does the bank offer ACH services?
- Does your payroll withdrawal need to be approved each pay period?
Bookkeepers have experience with banks, so if you are in the market for a new one, feel free to reach out and ask Team One Accounting for our opinion on the easiest bank to work with.
2. Keep the number of cash accounts to a functional minimum.
Certainly, you’ll need at least a business checking account, often a business savings account, maybe a business PayPal account, and perhaps a petty cash fund. You may also want a separate account for payroll; a lot of companies choose to. But, if you need more accounts, there should be a functional business reason to support them. The more accounts that you have creates more accounts to reconcile and keep track of each month.
The same is true of credit card accounts. It’s the keep-it-simple approach.
3. Reconcile all of your cash accounts every month.
Keeping all of your cash accounts reconciled each month is a good idea. If a bank error, accounting mistake, or even fraud occurs, you can catch it and get it resolved more quickly than if you delay.
By reconciling your accounts monthly, you will also have more accurate information about your balances and can move and manage your money better.
As you learn your balances each month, you can also move money around. Unless you spend a lot out of PayPal, plan to move that money to pay off debt or into your checking account on a regular basis.
4. Maintain a cushion in your checking account.
If your checking account hovers close to zero more often than not, you may be wasting precious time watching your bank balance instead of spending time to manage your business. If you make a small error, you might be taxed with costly overdraft fees, making your cash situation even worse.
Instead, consider depositing a fixed amount, like a cushion, that you never spend. You won’t get overdraft fees, and you won’t have to watch your balance so closely. You may give up some interest income, but the time freed up and the reduced worry will be worth a few extra pennies.
5. Watch your liquidity.
Cash is to business as water is to people; we cannot live without it. Make sure you have enough to cover future obligations, and when possible, build up several months of reserve for emergencies. Anything that you can liquidate quickly, such as accounts receivable, can count toward this fund too.
These five cash flow tips to keep bringing home the bacon in your business will help your business succeed. If you have any questions, feel free to reach out to Team One Accounting!