Managing Expenses
By: Tony Busch
Cash Flow Matters…
Sleep well. Your cash flow is under control.
March 31, 2005
This issue of the newsletter will focus on the benefits of successfully managing the cash flow of your business. Successful management begins with a basic understanding of the cash cycle of your business. This means that you understand the cash cycle of your business.
What is a cash cycle? Simply, it is the process of how and when the cash flows into and out of your company. While this is a pretty basic concept, the devil is in the details. For example, if your company purchased inventory and converts that inventory into a finished product, how much must you spend on inventory, how long will that production cycle last, when does the product get shipped, when is the customer billed, and how long will it take your customer to pay you?
Sure, these are common questions and challenges facing every business. The question is, how do you manage this information? Do you have a system that allows you to compare what is actually happening in each of these areas to what you budgeted should be happening in these areas? Without such a system, the business cash cycle will always be controlling you, instead of you controlling the cash cycle.
Obviously, a critical part of understanding your cash cycle is to understand your business expenses. In today’s world, it is not always easy to increase sales to improve business profits. Competition from many corners of the market will prevent you from simply increasing your sales price. Most business owners come to realize that the most effective means of increasing profits is to critically examine expenses. Often they discover more waste than they thought was happening. Impulsive spending is also a detriment to the successful management of expenses.
Effective control of expenses starts with a budget. Write down the expenses your business is expected to incur next year. Support those expenses with well thought out assumptions that explain each expense in writing. Keep those written assumptions close by for reference during the year. Look at the projected numbers and the supporting, written assumptions monthly. Each month compare the actual numbers to the budgeted numbers on both a month-to-month and year-to-date basis. Examine the variances that develop from this analysis and address those negative variances immediately. Pursue the positive variances and keep doing it the right way.
If you are looking for a comprehensive cash flow budgeting and management system, please download a free copy of the DEMO version of PrioraTMCash Flow Manager available at this web site, www.prioracfm.com.
With proper planning and management of the cash flow of your business, you too can feel more comfortable about the health of your business and you will sleep better knowing that many of the details are being effectively managed.
If you have specific questions about managing business expenses, or, if you have any suggestions or would care to share an experience you have had about managing the expenses in your business, please call or email your information to me.
Cash Flow Matters…
Sleep well. Your cash flow is under control.
March 31, 2005
This issue of the newsletter will focus on the benefits of successfully managing the cash flow of your business. Successful management begins with a basic understanding of the cash cycle of your business. This means that you understand the cash cycle of your business.
What is a cash cycle? Simply, it is the process of how and when the cash flows into and out of your company. While this is a pretty basic concept, the devil is in the details. For example, if your company purchased inventory and converts that inventory into a finished product, how much must you spend on inventory, how long will that production cycle last, when does the product get shipped, when is the customer billed, and how long will it take your customer to pay you?
Sure, these are common questions and challenges facing every business. The question is, how do you manage this information? Do you have a system that allows you to compare what is actually happening in each of these areas to what you budgeted should be happening in these areas? Without such a system, the business cash cycle will always be controlling you, instead of you controlling the cash cycle.
Obviously, a critical part of understanding your cash cycle is to understand your business expenses. In today’s world, it is not always easy to increase sales to improve business profits. Competition from many corners of the market will prevent you from simply increasing your sales price. Most business owners come to realize that the most effective means of increasing profits is to critically examine expenses. Often they discover more waste than they thought was happening. Impulsive spending is also a detriment to the successful management of expenses.
Effective control of expenses starts with a budget. Write down the expenses your business is expected to incur next year. Support those expenses with well thought out assumptions that explain each expense in writing. Keep those written assumptions close by for reference during the year. Look at the projected numbers and the supporting, written assumptions monthly. Each month compare the actual numbers to the budgeted numbers on both a month-to-month and year-to-date basis. Examine the variances that develop from this analysis and address those negative variances immediately. Pursue the positive variances and keep doing it the right way.
If you are looking for a comprehensive cash flow budgeting and management system, please download a free copy of the DEMO version of PrioraTMCash Flow Manager available at this web site, www.prioracfm.com.
With proper planning and management of the cash flow of your business, you too can feel more comfortable about the health of your business and you will sleep better knowing that many of the details are being effectively managed.
If you have specific questions about managing business expenses, or, if you have any suggestions or would care to share an experience you have had about managing the expenses in your business, please call or email your information to me.
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