From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(August 1, 2007) -- Even a perfectly healthy company may face financial problems if it doesn’t have enough cash in the bank when the bills are due. According to the Virginia Society of CPAs, there any several steps that business owners can take to ensure reliable cash flow.

Start by budgeting

Company leaders should keep abreast of trends in their monthly sales and expenses, how well clients are paying and what credit issues the business faces. Creating a realistic operating budget is a great first step to maintain a sense of the health of your business. Begin by finding out how much cash you have in the bank today, then estimate how much you will receive from customers and other sources in the coming month. Once you’ve totaled these numbers, subtract your projected expenses, including not only fixed costs, such as salaries and rent, but also variable items, such as supplies.

Check the cash situation

In examining your budget, determine first whether you will have enough cash to cover your costs during the month. If you won’t, consider how you will pay your bills and what this deficit says about your business. Is it due to a one-time surge in costs or an indication of ongoing problems?

Spot the trends

If you do have enough to cover your expenses, the next question is how your ending amount compares with your starting balance. If the final amount is higher or lower than the beginning figure, consider what that change says about your business. If you will end the month with less cash, does that mean that expenses are creeping higher? If your cash figure will be higher at the end of the month, how should you use those extra funds? When you understand the trends in your company’s financial situation, you can make timely adjustments for unexpected costs, a decline in revenues or greater demand for your products.

Keep the dollars flowing

In addition to maintaining up-to-date budgets, there are also some practical day-to-day ways to improve your cash flow. Companies don’t get paid for the goods and services they deliver until they bill for them, so make sure your invoices are sent out on a timely basis. In addition, your business should have a system to keep track of outstanding invoices and to contact customers who are behind on their payments. And when you take on a long-term project, negotiate an agreement with regular monthly payments to be made during the job, instead of waiting until the end of the project to receive your entire fee.

Of course, you won’t be able to take advantage of the payments you get until they’re in the bank and accessible. Ask about your bank’s policy on when the funds from deposited checks become available to you. If you have to wait several days to make use of your money, ask for a shorter “float” period for your deposits.

Use your judgment

Sometimes business owners do an excellent job of managing their cash flow, but they face problems because their customers don’t pay their bills on time. One way to cut down on outstanding debts is to know whom you’re dealing with from the start. Check your customers’ credit references and speak with other suppliers who have done business with them.

Your CPA can offer the financial expertise to keep your business running smoothly on a day-to-day basis and help you understand your cash needs and how to make sure they are met.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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