Your business must have a detailed forecast of cash flow.

Whether your business is a pre-revenue startup or a Fortune 100 company, one of the most important skills necessary to become a high-performing manager is managing cash flow, according to Sam Thacker, a partner in Austin-based Business Finance Solutions.

Unlike a Fortune 100 company chief financial officer, however, the average entrepreneur doesn’t have a staff dedicated to managing cash.

Entrepreneurs need to know a few significant rules about cash flow management.

Philip Campbell, a Round Rock-based certified public accountant has written a book about managing cash flow. “Never Run Out of Cash,” www.neverrunoutofcash.com provides easy to understand principles that new and experienced entrepreneurs can learn from.

Campbell’s 10 rules for managing cash:

• Never run out of cash. Running out of cash is the definition of failure in business, so do whatever it takes to never run dry.

• Cash is king. No cash equals no business.

• Know your cash balance right now. As a former bank commercial loan officer, I would often ask how much cash a prospective business has right now. If my prospect could give me a good answer, they were far more likely to get a bank loan. Why? Because it meant that business owner was updating himself or herself daily on one of the most important pieces of information in his business. It is a sign of a well-run business.

• Do today’s work today. Knowing what your cash balance daily means you to make adjustments to your cash flow forecast and your accounting system as they occur. Don’t wait until tomorrow.

• Either do your work or have someone else do it for you. If you don’t have time to keep your cash balance up to date, then delegate the duty to someone who can always keep it accurately.

• Don’t manage from the bank balance. It is easy to look at your online cash balance and believe that is the amount of cash you have to spend. Your bank balance and your cash balance are not the same.

• Know what you expect the cash balance to be six months from now. Campbell recommends monthly forecasting. An alternative, is to adopt a higher degree of scrutiny on cash with a forecasts of cash flow on a 13-week rolling forecast. This requires a business owner know what his or her anticipated cash should be based on a weekly forecast. Thirteen weeks is about as far out as you need to forecast for day-to-day purposes. The further out from the current week, the less accurate your forecast is going to be. The forecast is updated weekly, balancing the current week to the penny and making adjustments four weeks out as necessary.

• Problems with cash flow don’t just happen. Campbell is dead on here. There is never a reason for a business to realize on a Monday that they aren’t going to have enough cash for a Friday payroll. Businesses should be able to forecast accurately enough 13 weeks out. For business planning purposes, six or 12 months make sense.

• You absolutely, positively must have cash flow projections. This should be No. 1 on the list, Campbell says. “It’s impossible to run your business without them,” he adds.

• Eliminate your cash flow worries so you are free to do what you do best — take care of customers and make more money.

Campbell spends the rest of his 189-page book explaining each rule in lay terms and providing real-world examples.

Many people think managing cash flow is hard, but really it just takes a little education and regular consistent forecasting.

With a forecast of cash flow in place, better plans can be developed to survive and even thrive in this economy.

Wall Street – Don’t Count on Federal Reform

“Gain the upper hand by making smart decisions” says Neil Weinberg in the August 8, 2010 issue of Forbes.
Weinberg suggests the following:

Ignore the Chatter

To make money over the long haul stop trying to outguess the market and focus on setting up a mix of stocks, bonds and other assets that it makes sense for you to own. Then stick to it!

Invest in Indexes

Wall Street has built a large industry of managed funds, futures, and options and leveraged products that in aggregate can’t do any better than market returns. Don’t get sucked-in. Buy the whole market, via a cheap and tax efficient index fund or exchange-traded fund.

Find a Fiduciary

Make sure that the person that is giving you advice is putting your interest ahead of their own. They may tout themselves as advisors but most are salesman whose vague legal duty is merely to sell you products that are “suitable”.
A fiduciary by contrast must put your interests first. Registered retirement advisors are fiduciaries. You can also access one by switching from a commission based account to a fee account at a traditional securities firm. Get the relationship spelled out in writing – and negotiate the fees.

Admit Mistakes

Many of us have a hard time doing this. Instead capitalize on your dogs by selling them and using your losses to offset up to $3,000 of ordinary income and an unlimited amount of capital gains.

Less Tax Liability

Taxes are probably second only to asset allocation in determining in what you end up with.
Put tax-inefficient investments like bond funds and real estate investment trusts, into retirement accounts. Their income doesn’t get taxed until it is taken out.

Stocks and equity funds are best for taxable accounts where, as noted above, loses can be used to minimize, if not eliminate gains on your winners. You can also use appreciated stock as gifts to low tax- bracket relatives and bequests.