Being in a cash tight situation is stressful but this can happen with any company. There can be many reasons for your company to be in this situation. In this article, I will be discussing some steps we have used in the past to improve our cash flow. Estimate your cash flow needs – It is very crucial that you create your best estimate of your cash flow needs. As discussed in my previous article, cash management is a critical role for a controller. In that article, I also describe the steps to forecasting your cash flow. The importance of this is to assess how much cash you require and when ..read more

While it appears to be common sense, there are many best practices that do not get followed when hiring for your accounting team. Here are some guidelines to follow: Set expectations upfront – Its important to make it clear what is involved in the role especially if the role deviates from the typical expectations of that role. For example: if your business is cyclical and is unusually high in certain periods, it is important to let the candidate know. Or if certain processes are more manual than other companies, the candidate should be made aware. Always perform a background check – Thi ..read more

Collection management is a very important aspect of the cash management process. The following are some best practices: Monthly statements – Monthly statements should be sent to the customer regardless of whether it has been requested or not. This prevents the customer from claiming that they were not aware of a particular invoice. It also allows you to quickly request for a status of payment by invoice. The customer may have several layers of approval for invoices which results in slower payments. Weekly team meetings for accounts receivable – Weekly meetings should be set with your te ..read more

Three-way matching for vendor invoices is a method for ensuring that the invoice you received was the product or service requested by the appropriate party in your company and has been properly received or performed. When the invoice is for a product, you match the invoice to the purchase order and packing slip. When the invoice is for a service, you match the invoice to the purchase order and a sign off from your authorized company employee that the work was completed as required. The vendor invoice is processed when there is a perfect match or when there is a small variance. The var ..read more

There is always a risk when on boarding a new customer that they may not pay their invoices on time. You can reduce this risk by assessing their creditworthiness before giving them credit and terms. We often start with a sample credit application form filled out by our new customers with the following information: Legal name Address Name and contact of Officer / Owner of the business Name and contact of Accounts Payable clerk Banking reference Trade reference Clarification of any terms and conditions of the contract Signed agreement and acknowledgement of the above details The above in ..read more

Cash management is the most important role for a controller. This is always the first priority over the other responsibilities of a controller as the survival of the business depends on having available cash. If cash is handled poorly and suppliers are not paid on time, the suppliers will likely put your account on hold. Do it often enough and your company will likely lose that supplier. Cash management is the timing cash inflows against cash outflows using a best estimate at a predictable forecast. While we want to forecast as far out as possible, it is likely that we would only be ab ..read more

Controllers often get pulled into supplier meetings as part of negotiating new terms. The following are key metrics and reports to bring to the meeting during negotiations. Accounts payable detail listing It is always good to know the status of the account. If you are in good standings, it is important to make it known that you are a customer that consistently pays on time. However, if you are not in good standings, it is important to show the supplier that you have a plan of repayment. Days outstanding This is another good number to bring up to identify whether you are paying exa ..read more

The CEO Report is a high level report that shows key numbers on a weekly frequency. This report help identify quickly the state of the business. The numbers used in this report are typically readily available. This report consists of the following: – Bank balance – Line of credit – Accounts receivable aging totals – Work in progress (if your system tracks this number) – Inventory – Accounts payable aging totals – Running payroll totals for last four weeks – Running sales totals for last four weeks This report help identify problem areas of the business significantly quicker than th ..read more

Some controllers that come over directly from public accounting background do not realize the importance of bank reconciliations and often focus on reporting. The responsibility of the bank reconciliation is often handed to a junior staff to deal with. Unfortunately, if all bank transactions in your general ledger is not properly recorded or identified, there is a high likelihood that the junior accountant will either mismatch or, if given the ability to make entries, create duplicate entries in order to clear off transactions on the bank statement that could not be found on the accounting boo ..read more

We often under estimate the importance of keeping up to date bank reconciliations. The purpose of bank reconciliations is to compare your company’s accounting records to the bank records. It’s extremely important in the management of cash as it allows you to determine the actual bank balance. That is, your actual bank balance less any outstanding cheques. Keeping up to date with your bank reconciliations allow you to catch errors and fraudulent activity quickly: – unknown transactions can be immediately investigated – bounced cheques from customers can be quickly identified – duplicate tran ..read more