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Benefits Of Optimizing Cash Management

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Your ability to consistently generate sales and revenue is important to your small business’s financial well-being, but how efficiently you manage your cash can also have a significant impact on growth and costs of doing business. Here are a few simple ways that optimizing your cash management processes can have big impacts on your bottom line.

Minimize the cost of sales cycle uncertainty

Cash flow management is important to any size business — but especially those that are in “startup mode,” or are experiencing new phases of growth or reduced demand. Though these phases are natural ebbs and flows in the business life cycle, they make it difficult to accurately forecast sales or trends, project revenue, and manage cash flow streams in a way that works to your benefit.

To add additional complexity, external factors like industry seasonality or an economic recession are far reaching: Your own clients may not make timely payments, putting your finances under greater duress, and potentially costing in the form of bank fees when balances dip below required thresholds, or checks are returned for insufficient funds.

Manage the variables within your control by consistently tracking sales data made by all payment forms, planning for recurring monthly expenses (and identifying ways to reduce them) and ensuring you’re financially cushioned for unplanned expenses.

You might currently store cash generated from sales in a locked drawer or basic combination-lock safe to reconcile and count manually later. A technology-equipped cash box that counts cash as it’s inserted and removed provides the transparency to set thresholds around cash on hand needed to support daily operations, so you can leverage the rest of it to manage expenses and bank account balances appropriately.

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Reduce waste in your accounting processes

A recent study conducted by the National Small Business Association revealed that more than 40 percent of small businesses spend more than $5,000 a year on financial matters like accountant fees for the administration of federal taxes. Despite their investment in third-party financial resources, one in three business owners lose the equivalent of two full weeks of work time tending to such matters. If your current accounting methods include loosely documenting expenses and receipts for later reconciliation, inefficiency is eroding your bottom line.

Streamline your record keeping to ensure that you and employees authorized to make purchases establish (at minimum), a weekly habit of organizing receipts and invoices for purchases made. Leverage the networked transaction history record that the “smart safes” noted above include, to eliminate the redundancy of manually reconciling cash on hand with the receipts. If you have multiple business locations, you can also check in with the contents of multiple smart safes at any time with remote access.

Improve transaction-based accountability for employees

Risk Management magazine estimates that basic human error costs a company with 100,000 employees $62.4 million a year. Though employees who manage cash transactions may not intentionally give incorrect change or improperly secure cash boxes, human error can reduce profitability.

Leverage cost-effective technology to reduce human error, including safes with programmable lock settings that automatically close if a drawer is left open, and ones that track cash in and out.

Such technologies can also reduce internal shrinkage: Employees are more apt to steal cash perceived as “untraceable” versus merchandise that is tracked through inventory. Additionally, consider other surveillance tools like video cameras, and be proactive with consistent hiring processes. For example, crime and risk expert Chris Mathers says that background checks may be the single biggest thing companies can do better — in addition to periodic monitoring for internal theft after the time of hire.

Reduce your vulnerability to loss

A small business insurance policy can provide coverage for valuables your business owns and may lose in the event of theft or disaster, but it’s not a guarantee that you’ll be compensated adequately, or that you’ll be paid in a timely manner. In theft claims, for example, the police will likely ask for an inventory of what was stolen and its value — yet the amount of cash that was stolen can be difficult to prove in lieu of current transaction records.

The lack of such transaction history may introduce the need for further investigation until the proper authorities, and your insurer, determine the amount that was stolen. All the while, your business must operate without that cash (along with whatever deductible your insurance policy requires to cover the event).

Technology that suffices as official proof can mitigate the potentially devastating impacts of such events. Invest in a video security system that can automatically detect and notify you of high-risk behavior and internal and external threats, to ideally stop them from occurring altogether.

ByWes Wernette currently oversees marketing at FireKing Security Group in New Albany, IN. The company specializes in products and services to protect and organize your business, including safes, cash management products and file cabinets.

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Featured Columnists at the CEOWORLD Magazine is a team of experts led by Camilla O'Donnell, James Reed, Amarendra Bhushan, and Amanda Millar. The CEOWORLD Magazine is the worlds leading business and technology magazine for CEOs (chief executives) and top-level management professionals.
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