What Kind of Cash Flow Management Do You Need?

If your company is alive and operating, you have cash flow. However, that river of green may not be flowing as much as you'd like, or you may be uncertain about whether it's flowing the way it should be. Presumably, that's why you're reading this.

So let's see if we can match up the kind of business you have with the most appropriate types of cash-flow management tools.

If you manage a service business, and you do not typically extend credit to customers, and you have just a few major customers, then just about any cash-flow management system will work for you. You may be perfectly satisfied with the cash-flow management capabilities built into your business accounting system. Or you may prefer a more flexible spreadsheet-based approach, which permits easy "what-if" projections so you can account for future business uncertainties.

If you sell many different products, particularly ones which may decrease in value over time, you need a good inventory-management solution to identify slow-moving or end-of-season/line products. You won't sell many winter coats after February, for example, so maybe you should plan to put the slow-movers on sale in January. The information you need may come from an existing inventory report, or you may need to extract information from the inventory and sales database and use a report-writer application to get the information in a form that's most useful to you.

If you grant credit — and particularly if you have many smaller customers to keep track of — you will almost certainly benefit from some automated system to manage credit and collections. Most sales and accounts-receivable applications include capabilities for creating invoices, periodic customer statements, and dunning letters. More sophisticated applications may include related capabilities in a CRM (Customer Relationship Management) function.

If you have all the complicating factors — many products and many customers to whom you grant credit — you'll likely need a combination of cash-flow management and some way to bring it all together, such as a spreadsheet or overall cash-flow-projection calculator.