Cash management involves the collection and management of cash flows. Like many aspects of life, it is important to both individuals and businesses. It is a key to a company's financial stability. In addition to being a valuable component of a total wealth portfolio, cash is also indispensable for financial stability for individuals.
However, many CPA websites indicate that they have cash management as a service, but the services offered don’t really equate to cash management in its true form.
What is cash management, really?
Cash management refers to the method through which an organization manages the financial operations, including investing cash in various projects, collecting revenues, paying expenses, and dealing with liabilities, all while ensuring it has sufficient cash available for future endeavours by the business.
As you can imagine, offering these services to any business would consume a lot of resources, communication, and access to any and all accounts owned by a business. CPAs would also need to act as advisors in order to properly manage the cash flows of the business while providing advice regarding potential investments.
An efficient cash management system allows a business to allocate its funds to cover operating expenses, invest, return or award money (as dividends) to shareholders, while maintaining appropriate levels of reserves.
Why do businesses need cash management services?
If you’re a business owner dealing with liquidity problems, here are a few facts you have to know about cash management and how it can reignite your cash flow. First, it's important to note that cash management’s ultimate goal is to maximize liquidity and minimize the cost of funds.
Cash management is an integral part of creating and sustaining a company’s financial stability. As “cash” is the primary asset we use to pay our obligations (either personally or privately), it is important we manage it accordingly to maximize earnings. While maintaining the company's balance sheet is extremely important, so is earning a return on “inactive” cash.
Almost all cash management services can be integrated with your company’s online banking and integrated accounting system, such as Dryrun. Your business administrators and you can access the funds anytime, anywhere, even remotely.
Once your business has fully integrated with online banking and cloud accounting, it provides greater control of your cash flow and insights. This is usually customizable according to each business's unique needs.
Unless you offer an integrated suite of cash management services as well as options for advisory services to your clients, your CPA firm is not really offering what is defined as “cash management”.
What are the goals of cash management?
The goal is to maximize the cash flow that is uninvested in fixed assets and inventories while ultimately avoiding the risk of insolvency. Monitoring the level of liquidity, the management of cash balances, and the short-term investment strategies are all goals of cash management.
Cash management is especially important for startups and businesses looking to grow or expand their operations over the next few years. Even if a small business has many customers, an outstanding reputation, a competitive product, and has steady sales, cash flow can be a problem if proper cash management is not employed.
Poor cash flow makes it hard for companies to receive funds in the event of unanticipated expenses. Ironically, it’s easier to borrow money when you are already flush with cash. So ultimately, it is the goal of many companies to properly manage their cash flow in order to avoid many of these problems.
Offering full cash management services to your clients is an extreme value add, as many small or new businesses do not have the time or internal full-time resources to conduct this type of accounting. Good cash management is easy to achieve with integrated accounting software, as insights and forecasts are more readily available and do not require as much output or effort to achieve as they once did.
Using software like Dryrun to conduct this type of research and analysis makes it easy to provide comprehensive cash management services to your clients with minimal additional effort required. It’s a win-win for your firm and your clients!
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