Control of cash disbursements

Getty Images Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. The goal is to manage the cash balances of an enterprise in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash management include a company's level of liquidity, its management of cash balances, and its short-term investment strategies.

Control of cash disbursements

Indirect Method or Reconciliation Method:

You may anticipate large profits in the next six months, but if you don't have enough cash coming in to cover your expenses during that time, you may not get a chance to realize those earnings. That's why it's important for all businesses to develop the right strategies to maintain a healthy cash flow.

The following tips can help: Speed up receipt of cash. Any steps you can take to shorten your receivables will boost your cash flow. For instance, send out invoices immediately after the delivery of goods or services.

Another idea is to change your payment terms - for example, from 60 days to 30 days. Offer a small discount to customers who pay their bills early and charge a penalty to those who pay late.

Monitor your receivables on a weekly or bi-weekly basis and follow-up with late payers when appropriate. Do a financial check on new customers before offering them credit.

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Also ask for and check their business references. Use your business credit card. Learn about your card's grace period, and take advantage of it - you may have up to 21 days after receiving your statement to make the payment. Some cards also come with cash-back features.

Speak to your business banker about the card that's right for you. Encourage use of payment cards. Depending on the nature of your business, you may want to consider accepting credit card and debit card payments. This allows you to receive next-day value for your sales and services, without the need to handle cheques and make deposits.

Whether you serve customers over the counter or online, a merchant services solution makes it easy to process payment cards. Don't forget to compare costs when investigating a merchant services solution.

Analyse your cash flow. Many businesses go through cyclical highs and lows. Clothing retailers, for example, typically have their best months in December, while schoolbook and uniform suppliers do well in at the beginning of a school year.

A cash-flow analysis can highlight the cycles in your business. This information can be used in many ways, such as timing your borrowing, arranging the right amount of staffing, and boosting your marketing efforts during lulls.

Work with an accountant. The services of an accountant can serve as an investment rather than an expense. An accountant can review cash-flow projections and results, provide insights into areas that you may have overlooked, and help you anticipate and plan for cash-flow problems.

Get a line of credit. Having a line of credit in place to cover short-term needs and emergencies is a much more efficient way to manage your cash flow than trying to get a loan in a hurry.

Rates are competitive, you can draw from your line of credit when you need it, and you pay interest only on the amount borrowed. Arrange for a line of credit before you fall short.

Put your cash to work. A high-interest savings account for business allows you to earn a competitive rate of interest on your cash on hand, but the funds are accessible whenever you need them.

You earn interest every day on each dollar saved, and can withdraw the money whenever you need to. You'll free up some cash that can be used to tide the business over when cash flow is tight.

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Another way to improve your cash flow is by offering deals on your products or services to customers who buy for a fixed period of time.A testamentary trust is a trust that is established under the terms of a will and that is effective only upon the death of the individual who created the will (the testator).

Sometimes third party inter vivos trusts (trusts created during the lifetime of the grantor) serve as wills.

Control of cash disbursements

In attempting to isolate the effect of a single factor on a certain outcome, researchers often use statistical techniques to “control” for the effects of other variables. Before I start writing how to reconcile cash it is very important how you count cash while cash count. The best practice is to count cash in hand on closing and opening of a business day, and it is strongly advised that cash count should be made on surprise bases and at irregular interval.

Businesses need proper internal controls for cash (such as segregation of duties) to both prevent and detect misappropriation of cash through disbursements. 1. Speed up receipt of cash. Any steps you can take to shorten your receivables will boost your cash flow.

For instance, send out invoices immediately after the delivery of goods or services. Cash disbursements should be approved by the appropriate level of management.

To test this assertion, select a sample of payments and check that all payments have proper authorization. A further step is to vouch the cash disbursement back to the source document.

Controlled Disbursement | Cash Management | BB&T Bank