Understanding the Power of Cash Management


Ask most owners how they know whether their businesses are healthy, and they’ll point to the bottom line. It’s all about being profitable, right? Actually, a much better indicator of a company’s health is how effectively it manages cash.

Managing cash involves more than keeping track of the currency in your cash register. When talking about cash management, we’re referring to a company’s current assets and liabilities. The asset side includes cash on hand, what’s in the checking account, and receivables, or what the company expects to receive in the near future. Current liabilities include bills and other expenses that are normally due within 30 to 40 days.

Profit may be your goal, but cash flow is the fuel that keeps your business operating. That’s especially true for smaller businesses. Fortunately, you can take simple steps that will improve your cash management.

Maintain reserves. If your company is like most businesses, there are times when you feel prosperous, and other times when you struggle to find enough cash to pay bills.  Most businesses have times when less revenue is coming in, however, they still have bills to pay. Having a cash reserve to draw upon provides a safety net for those slow times. Business Money Market Savings Accounts are an excellent choice for cash reserves.A line of credit can also help reduce the effects of these cycles on your business.  The best time to apply for a line of credit is when the need is not immediate. Lenders are more likely to approve a line when your business has a strong cash flow.

Manage payables. You don’t want to pay late, but unless you’re receiving some kind of discount, there’s no reason to pay too quickly. Try to negotiate favorable terms with your creditors, so you’ll have more time to pay. Many creditors will be flexible if you communicate with them.

Use tools. Cash Management services provide an easy way to keep an eye on your cash and move money between accounts. You can assign specific access to your employees and your company’s accounting firm.

By: Mike Murphy, Indiana Members Credit Union

Mike Murphy is Vice President of Business Services at Indiana Members Credit Union.  Our Business Banking team would be happy to show you how our online banking tool, NetTeller, and our lines of credit, as well as other services can help you improve your control over cash.

Please contact us at 317.554.8105 or visit us online at www.imcu.com.

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