Most businesses monitor cash pretty closely but everyone seems to have their own system. NALP Consultant member, Monica Muir, discussed this and more in her NALP webinar QuickBooks Tools and Strategies for Better Cash Flow. The webinar is now available in the archives.
Here are Monica’s 10 ways to help you monitor and/or improve cash flow.
1.Monitor your cash on hand. This means includes money that has come in and may not have been entered in QuickBooks yet as well as payments that have not cleared yet. If you are good about entering transactions in QuickBooks and take advantage of the Online Banking feature in QuickBooks, then this will be helpful.
2.Reconcile your bank and credit cards monthly. Do not rely on just downloading transactions from the bank. I have seen transactions missed or duplicated for a variety of reasons, so be sure you go through the reconciliation process (clicking on the Matched button will speed up this process). That will help make monitoring your cash in step 1 more accurate.
3.Review your Statement of Cash Flows.
4.Monitor Accounts Receivable closely. Besides the A/R Aging Reports, you might also want to look at the Average Days to Pay (a new report in V2011). This will let you quickly see who’s slow and who’s fast – and wouldn’t it be nice to have more fast-paying clients!
I like to add the columns Overdue and Days Overdue in the Customer Center – it’s a quick visual way to monitor. (Right-click, select Customize Columns, then select those 2 columns)
5.Make it easy for customers to pay you. I know many don’t like to accept credit cards, but sometimes accepting a credit card will get you paid much faster or even up front. You might even be able to have the card on file so you can take monthly payments or whatever you prearranged with your client.
You can also have clients pay you online not only by credit card but by ACH, which has lower transaction fees- it’s per transaction not a percent of transaction. There may be a monthly fee, so you’ll have to check that out. You might like the Intuit Payment Network. Personally, I use Bill and Pay because it had some really nice features I couldn’t do through Intuit.
6.Accept payments up front or at time of service, then you don’t have collection concerns. I recommend setting prepayments aside and using it for the client work instead of other bills. If you find you using it for other payments, that should be a warning – you need to take a closer look at your financials.
7.Run the Cash Flow Forecast in QuickBooks. This assumes customers pay you on time and you pay your vendors on time, but it can be very helpful.
8.Monitor your payables closely – the A/P Aging summary and Unpaid Bills are two good reports. Of course this assumes you enter your bills in QuickBooks and don’t just simply use the Write Check feature when it’s time to pay bill! Here’s a more in-depth look at how you do that.
9.Monitor job costs – If you have job or project costs, then you need to monitor the expenses for that job and the invoicing for that project. For this reason, I like QuickBooks Premier because of the additional reporting. If you want to know more, you can look at this video or contact our office. If you are in Pro and want to move up, we’ll be happy to get Premier for you and help you with the upgrade.
10.Monitor your debts. Loan and credit card payments may not show up in your A/P Aging reports so you need to be sure you consider these. The Statement of Cash Flows helps as do the Current and Debt ratios.