Daily management that keeps cash flow stable: making receipts, payments and inventory visible (from the Small and Medium Enterprise Agency's guide)What you can do every day so that you do not run short of money
With cash flow, you have more options if you make it hard to break through daily management than if you deal with it only after it becomes tight. The Small and Medium Enterprise Agency's guide to using accounting sets out, as efforts to stabilize cash flow, recording cash and deposit movements, managing accounts receivable (claims) and accounts payable (debts), keeping track of inventory, and a cash flow table. This article sets out the main points as a general explanation.
- 1. RecordGrasp money in and out every day with a cash and deposit book
- 2. ReceiptsManage accounts receivable by customer and check the scheduled receipt dates
- 3. PaymentsKeep the gap between receipts and payments in mind and keep to payment due dates
- 4. InventoryGrasp quantity, amount and gross profit, and dispose of unneeded inventory early
- 5. ForecastUse a cash flow table to find in advance when funds will run short
Key points
- Keep a cash and deposit book and grasp money in and out every day (the Small and Medium Enterprise Agency's guide)
- For accounts receivable, build a ledger by customer that records the previous month's balance, the amount arising this month, the amount collected this month and this month's balance, and once the scheduled receipt date has passed, check promptly with the business partner
- If payments such as purchases come before the receipts from sales, your company bears the gap for that period. Manage with the difference between the timing of receipts and payments in mind, and keep to payment due dates
- For inventory, grasp quantity and amount and make gross profit clear. Setting criteria for disposal and disposing early also helps stabilize cash flow
- Make a cash flow table (forecast) covering the next several months and find in advance the periods when funds will run short
What to do in practice
- Use the free tool "Cash flow table" to check the forecast month-end balance up to 12 months ahead
- Build a ledger of accounts receivable and check every month whether any are past their scheduled receipt date
- Use "Break-even point and required sales" to check the relationship between fixed costs and sales and identify costs that can be reviewed
In a shop or a company, even when there are sales, the day money comes in and the day it is paid out can be out of step, and money can run short for a while. To keep that from happening, it is important to record money in and out every day and to check the money that has not come in yet and the money that has not been paid yet. Knowing your stock of goods and not holding too much of it also helps. If you make a table of the outlook ahead, you can find early the times when money is likely to run short.
- ○Applies: Record money in and out every day
- ○Applies: Check the scheduled dates for money not yet received
- ○Applies: Count the stock and do not hold too much
- ×Does not apply: Think about it in a panic only after the payment day comes
Points
- Record money in and out every day and know how much is left
- Check the scheduled dates for money that has not come in yet (the price of what you sold)
- Count the stock of goods and avoid holding too much
What the words mean
- Accounts receivable
- Money for goods you have sold but have not yet been paid for
- Inventory
- Goods and materials you hold in order to sell
- Gross profit
- The amount that is the base of profit, found by subtracting the cost of buying the goods from the money you sold them for
- Small and Medium Enterprise Agency: Small and Medium Enterprise Agency, Hints for improving management capability: a guide to using accounting for small and medium-sized enterprises
- Small and Medium Enterprise Agency: Small and Medium Enterprise Agency, 2024 White Paper on Small Enterprises: efforts to improve the cash flow of small businesses
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.