5 Critical Cash Procedures


5 Critical Cash Procedures

I find that the more cash a company has the more it has a tendency to become complacent. That means that great cash flow gives a false sense of security and many contractors have a tendency to relax and pay less attention. I see this happen every summer.

So, when cashflow is great because everyone is working overtime this is the most important time to pay strict attention to cash.

Here are 5 critical cash procedures:

1. Bill immediately or collect COD.
If you own a restaurant, you are COD. Patrons pay at the end of the meal. If you don’t have the luxury of COD payments, then you must bill at the completion of the work/project/job. Payment terms should be clearly stated on the proposal. Bill the day the work is completed, or at most the next day. The longer you wait to bill, the longer it takes to get your money.

And, the longer you take to bill, the more your customer thinks, “He hasn’t billed me for a month. He must not need the money. I’ll wait to pay that bill.”

2. Make sure that you complete weekly cash flow reports.

This lets you see how much cash and receivables have come in during the week as well as the disbursements for the week. It also allows you to plan for the following week’s inputs and out goes. If you’d like a copy of a weekly cash flow report, send me an email (rking@ontheribbon.com).

3. If you have employees picking up checks, make sure that the person receiving the checks notes on the paperwork that he/she received the money.

I have seen customers’ checks floating in parking lots. If your employees receive checks, they need a colored plastic envelope to put the checks in. With a colored envelope, you won’t hear an employee say, “I turned in the check with my paperwork” and you don’t see a check.

4. Stamp checks for deposit only with your account number as soon as you get them.

This helps to ensure that the checks go in the account that you want them to. If someone walks into the office and steals the checks (it’s happened), they are much more difficult to cash. And, if someone has set up a checking account with a similar sounding company name (it’s happened too), it will be difficult to deposit those checks in that account.

5. Save 1% of all cash that comes in the door.

This is your rainy day fund. You won’t miss the 1%. Every time you make a deposit in your checking account, write a check for 1% of that total for your savings account. Easy to do.  It takes discipline to do it all the time and NOT touch the money.

Implementing these cash procedures helps you protect your hard earned cash.