Cash flow management is one of the key things you have to pay attention to, when managing a small business. Many small businesses fail due to cash flow problems. This is because the existence of a small business is often dependent on its cash flow. Unlike big businesses, which are often able to access big credit lines at short notice, a small business usually has to pay for stuff in cash. Thus, the moment the business’ cash position is threatened, its very existence comes into question. It is against this background, then, that we see many small business owners being keen on using the best cash flow management software in their operations, so as to maximize their chances for success. In this article, we will explore that subject (of using cash flow management software in a small business) further. We will be seeking to understand why it is important to use such software. We will also be trying to understand what options are available to small business owners looking for cash flow management software for use in their enterprises. We will be going further, and seeking to understand the considerations to be made when looking for cash flow management software for use in a small business, and the steps to follow when implementing the cash flow management software in the small business enterprise.
The importance of cash flow management software in a small business
The task of managing cash flow in a small business enterprise is not an easy one. In big enterprises, we often encounter a person who is employed, on a full-time basis, to undertake cash flow management work. There are even enterprises where an entire department, with several employees, is dedicated to the task of managing cash flow – under the supervision of a financial controller or some other official of that caliber. In the context of a small business enterprise, the task of managing cash flow management often falls on the shoulders of the business owner: who has to do it alongside all the other business management tasks.
Keeping track of cash – the incoming cash and the outgoing cash – is not easy, especially in fast moving businesses. It gets even more complicated when you come to learn that cash flow management is not just a matter of keeping track of the cash that is coming in and the cash that is going out. Over and above that, cash flow management also entails controlling the cash, to ensure that you don’t end up with too much money going out, and too little coming in, leading to cash flow problems.
It is the complexity of the cash flow management task that necessitates the use of software. Cash flow management software, when properly implemented, is able to keep track of both incoming and outgoing cash: thus easing a task that would otherwise have been very taxing. Furthermore, cash flow management software, when properly implemented, is able to raise red flags, whenever it detects cash flow problems coming up. Thus, cash flow management software (when properly implemented) is capable of automating almost the entire cash flow management task: to a point where you are only left with the decision-making role.
Cash flow management software options
Many options are open to you, when looking for cash flow management software for use in your small business. This is where, for instance, you can go online and download a cash flow management application from the web – and proceed to use it in your business. This is also where you can opt to use a web-based or cloud-based cash flow management software application in your business. Nowadays, we even have mobile apps that can be used for cash flow management in small businesses. There is also the option of creating a cash flow management system by yourself, using an Excel spreadsheet or some other similar application. So there are numerous options open to you: the most important thing is to ensure that you end up with a cash flow management solution that is truly effective.
Considerations to be made when looking for cash flow management software
There are several considerations that need to be made, when looking for cash flow management software.
The first consideration is as to the user-friendliness of the cash flow management software application. You need a cash flow management tool that is easy to use. Some cash flow management software applications are so complex that using them turns the cash flow management task into a very tedious one. Sometimes, you realize that you would be better off doing the work manually, rather than doing it using a very complicated software application.
The second consideration is as to the effectiveness of the cash flow management software application. Here, you have to look at the features in the cash flow management software application under consideration, and try to figure out whether those are the features you need, given the unique cash flow management needs of your business.
The third consideration is as to compatibility of the cash flow management software application with the other software tools in use within your business. Ideally, you should be aiming for a cash flow management tool that will be able to import the data it needs from other applications automatically (and also one that is able to export its output to other applications automatically). Otherwise you will end up with an awkward scenario where some data has to be re-entered manually.
Steps to be followed when implementing the cash flow management software
The first step is that of identifying your business’ cash flow management needs. This will, in turn, tell you about the features to look for in the cash flow management software.
The second step is to undertake a search, to see whether a cash flow management software solution with the features you need exists in the market. If you find none with the exact features you need, you may have to create one for yourself in-house. That doesn’t have to be a difficult undertaking: because creating a cash flow management software application in-house may just be a matter of taking an Excel worksheet and input the necessary formulas – and then ensuring that all cash-related data is entered into the worksheet.
The third step, after procuring (or developing in-house) a cash flow management software application, is to test it, before implementation.
The fourth step is that of actually implementing the system: which means entering the current cash position into the system, and ensuring that all the subsequent inflows and outflows of cash are captured in the system. After the cash inflows and outflows are captured by the cash flow management software application, the most important thing is to ensure that cash flow reports are generated from the system on a regular basis. Then the appropriate actions need to be taken, as per the indications in the cash flow reports generated from the system, so as to ensure that the business remains in a good cash position at all times.