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December 24, 2018

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Cash is Like a Carbohydrate

June 26, 2018

 

Remember when non-fat and low-fat treats became popular?  Maybe not so bad for you we thought.  Boy, were we wrong!  All the manufacturers did was replace the fat with carbohydrates and add some artificial flavor to the treats.  They then figured out that carbohydrates are very addictive.  Now almost everything you buy on the interior shelves of the supermarket is loaded with too many carbohydrates.  So...what’s that have to do with cash you say?

 

It’s frightening how painless (and addictive) shopping, purchasing, and the delivery process is on Amazon.  Now think about all your employees that have any level of purchasing power.  They can go on Amazon to buy things or use many other methods to spend the company’s money.  Here’s just a few of those methods; Venmo, Square, PayPal, hand written checks, credit cards, cash, purchase orders, verbal commitments, etc.

 

Before you eat that giant wedge of cake you need to make a decision.  Before you spend that money you need to make a decision.  Get in front of the spending before it happens.  Here’s one suggestion:

 

Determine who is spending money on the company’s behalf and understand the method they use to make the payment or commit to payment.  Create processes and procedures that allow you to pre-approve spending over a certain dollar amount.  Spending under a certain dollar amount should be communicated to you as well, at least monthly.  Once all these processes and procedures are put in place, you are now in more control of cash and cash commitments.  Make sure you don’t become a bottleneck.

 

PS. If you haven't figured out how to make it easy for your customers to spend money with you, then you're missing out.

 

PPS. Think about creating and maintaining a cash forecast that you regularly update.  The frequency of the update depends on your cash situation and the complexities of your business.  This working cash forecast is your scorecard to keep track of the company’s cash commitments coming in and going out.  It will help you make better decisions on cash.

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