July 24, 2024

Cocoabar21 Clinton

Truly Business

Cash Management – How to Prepare a Daily Cash Position Report – Part 1

3 min read

As I have mentioned earlier, cash flow report is a very important report that every business owner or entrepreneur must be able to analyze so that they can plan for their next move in business. Almost all business gurus and academicians have stress on the importance of preparing cash flow report but unfortunately none of them give specific guide lines on how to prepare it. Cash flow report that we mentioned here is a dynamic cash flow report where it will show us the cash position at any point of time and at the same time can act as a powerful tools to enable us to make as much money as we can by investing the surplus fund in a very short term investment such as money market placement. Cash flow statement that every accounting text book recommended is cash flow report generated from Balance Sheet and Profit & Loss Account and will give depth analysis on net cash flow recorded from operating, investing or financing activities.

First and foremost, if we have only one bank, the opening balance for our cash position for that month must be the closing balance for the preceding month. This can be derived from the Balance Sheet section under current asset which will state the closing balance of the bank balance for the preceding month. If for any reason the enterprise could not be able to produce their company’s account such as P&L and Balance sheet due to their company’s size, they can obtain the closing balance from their cash book as this is the basic information that they have to prepare if they still have not set up the accounting system for their business.

If you have only one bank for your business, it is advisable to prepare your payment according to the payment categories in your cash flow statement. For example, if you have decided that your payment categories are for payment of taxes, utilities bills, subcontractors, suppliers, petty cash and others, you should compile all your invoices and bills according to their respective categories. Once you start preparing your payment, you should write the cheques according to their serial number. For example, if your cheque start from no 000001, and you intend to prepare 20 pieces of cheques for suppliers payment, the serial no for the cheques prepared must be from 000001 to 000020.Subsequently, if you want to prepare 10 pieces of cheques for subcontractors, the serial numbers should be from 000021 till 000030.You can continue using the same technique to other payment as well. Whether you prepare payment manually or by using special printed cheque, you should follow the same technique.

The same concept applies when we received incoming cheques from your clients and customers. By following the same technique, if you have some major clients that normally total up for almost 80% of your income, you are strongly advisable to classify all the major clients in your income categories. Other income that normally consist about 20% from your income, you can simply specify them under others categories.

Leave a Reply

cocoabar21clinton.com | Newsphere by AF themes.