Cash management is the process that involves collecting and managing cash flows from the operating, investing, and financing activities of a company. Cash flow is the lifeblood of any business. Without a steady stream of cash coming in, your company will quickly run into trouble.
This is why it is so important to have efficient cash management and payment control procedures in place.
Let’s discuss how to keep your company’s finances in order and protect your bottom line whether you work in a legal field or own a WooCasino.
The payment schedule of any business is a short-term cash flow plan, which is an operational tool for managing money. As a result, some financial and economic authorities mistakenly believe that the operational payment calendar is a more comprehensive version of the cash flow budget.
Metrics and calculations for cash flow projections are planned ahead of time, with no adjustment possible during the reporting period. The payment schedule is set and updated on a daily basis, therefore, it’s impossible to tell whether the actual cash flows match those projected values.
It’s crucial to understand the basics of establishing a payment schedule and changing forecast indicators, as this document must be completed correctly and factually. What these regulations entail, as well as how economic services can ensure that the company’s operational payment calendar is accurate and true for each day of employment.
For an operational payment calendar to be as effective as possible, the head of the financial service should adhere to the following principles in working with:
- planning of cash flows (inflows and outflows) is made based on primary documents, not by a forecasting method;
- cash flows are planned in the analytical part of the company’s settlement accounts and cash flow accounts;
- cash flows are planned in the analytical part of settlement accounts and cash offices of the company; when working out the expenditure part of the payment schedule, the priority of cash flows is taken into account;
- payment calendar is composed in daily cash flow analytics, and daily adjustments are made on the basis of the fact of cash inflows and outflows.
Types of Payment Calendar System
Inoperative payment calendar cash receipts are planned according to primary documents of sales of goods (works, services) and contractual conditions of payment (prepayment, payment after the fact or on terms of deferred payment). To create a plan of cash receipts from the future sale of goods (works, services) use the applications of customers.
Loan agreements or loan and credit schedules (appendices to loan agreements) are also the basis for making cash flow forecasts.
In any case, cash flow plans should contain the following details:
- basis of payment;
- name of the payer;
- amount of proceeds;
- cash flow item;
- projected date of receipt of funds.
The structure of the organisation’s cash flow depends on the specifics of its business activities, the legal form of ownership and other factors.
The main types of cash flow are:
- operational (related to the company’s current activities);
- investment (used to finance investments);
- financial (associated with financial transactions).
Operational cash flows include all inflows and outflows of cash that are not related to investing or financing activities. In other words, these are receipts and expenses that arise from a company’s core business operations.
The most common examples of operational cash flows are:
- revenue from the sale of goods or services;
- wages and salaries;
The conclusion is that an operational payment calendar can help a company manage its cash flows and payments. Internal paperwork should regulate the use of the payment schedule. It is important for all employees to understand their responsibilities and obligations in order to manage a company’s cash flows effectively.
Please keep in mind that when working capital is short, it’s normal for companies to have an outflow of cash. It’s reasonable to highlight the significance of non-payment in the register of demands by assigning a payment priority group to each.
If a firm does not have enough money to pay all requests on any day during the payment period, payments will be made in accordance with your business priority.