CASH MANAGEMENT: KEY TO BUSINESS SUCCESS.

John Muchiri
mwasj.jm@gmail.com
entrepreneurbridge@gmail.com
B.com (finance option)
Kenyatta University

You must be wondering why many business start-ups fail to materialize and eventually die in their early stages. Poor cash management is the key stumbling block for entrepreneurs. The lag between the time you have to pay your employees and suppliers and the time you collect cash from customers is the problem, and the solution is cash flow management.
When it comes to the success of any business cash is vital. Entrepreneurs need to understand that cash either at hand or in the bank is what the business need in order to be in operation.
Cash flow refers to the movement of cash into and out of a business. Cash movements into a business are the cash inflows while cash outflows are cash movements out of the business.

Steps to attaining financial health in your business.
1#. Prepare cash flow projections.
With reference to previous payments and receipts, an entrepreneur can make future projections on how he intends cash to flow into and out of his business..
This can help to point out 'danger zone' earlier before the actual action occurs.
Also cash flow projections allows the business owner to control his business financial future.

2#. Match cash inflows and cash outflows.
A business can be within its budget but still experience cash flow problems. This can be due to mis- match between cash inflows and outflows.
An entrepreneur can review his credit policy and try to maximize on the creditors terms as a way of reducing this mis-match.
Ways of reviewing credit policy.
-Offer discounts to customers who pay their bills rapidly.
- Review customers records, this will help to rate your customers credit worthiness.
- Don't give credit to first time customers.
- Ask customers to make deposit payments while placing an order.
- Reduce credit period to improve cash liquidity.

Meeting your debt obligations
- Pay prompty to take advantage of suppliers credit policy.
- Build relationships with your suppliers/ creditors.
- Keep proper inventory records. This is imprtant as it reduces chances of buying in bulk items that take longer before they clear.
- Match your borrowings with your needs. If your are undertaking long term investments consider long term loans.

3#. Avoid drawings.
Most entrepreneurs keep one bank account for their personal life and business.
This can be disastrous especially when no records are kept.
To avoid this trap, entrepreneurs should consider themselves as employees of the business and pay themselves salary.
This increases accountability and unnecessary cash outflows are greatly minimised.