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By Robert J. Nebel

Do you ever feel that the most obvious item on your agenda is overlooked from time to time? Sometimes life’s little things can cloud the big picture. Take for example, your company’s cash balance. While everyone from the CEO to the mailroom clerk in the organization is scrambling to meet the daily obligations, somehow the cash balance can go unnoticed-to the point of economic damage and ultimate company demise.

Whether it is a yearly, monthly, weekly or daily ritual, many CEO’s, CFO’s and cash managers have become more vigilant of their cash balance, especially in this economy. “I’m in my third start-up business right now and have learned that managing your cash is paramount to your company’s survival,” says Robert Rosenburg, CEO of AirShares Elite, an aviation firm that operates an upscale flight school, several aviation magazines and sells shares of air transportation. “Some say, “Bob’s cheap’, but I really do go carefully over each expense. I know how much is in the bank everyday.”

While you do not have to be a cash balance hawk like Mr. Rosenburg, you should monitor your receivables, according to Eric Trope, CEO of the Staircase and Millwork Company, a niche-building supplier. Mr. Trope plans his company’s expenses by building a detailed model income statement. “I do have a detailed model of sales and more importantly, who owes us,” says Trope. “This comprehensive model keeps me up (to date) on collections, which in turn, helps me stay in line with my cash balance.”

As detailed models assist Staircase and Millwork from going into the red, more accurate forecast plans help the Quellan Company stay on track. “We need to keep ourselves to a 1% variance projection in our cash balance forecast,” says Johnnie Engesser, the CEO of Staircase and Millwork, which designs early-stage circuits for high-speed technology. “If you produce accurate monthly forecasts and monitor the results, it can help keep you out of trouble.”

Roger Haggerty, CFO of The Interlochen Group, a consulting firm, closely monitors receivables, payables, vendor debt and payroll on equal footing. “It is important to closely look at those areas on a daily basis,” says Haggerty. “The key is to put together an economic plan that is honest to the board, employees, vendors and the bank.” Haggerty adds that it was dishonesty that led to the collapse of many large-scale corporations.

While it is a constant battle to manage cash flow, many cash managers agree that you need to be creative with every dollar in your coffers. “I buy a fair amount of office furniture at the lowest price possible,” says AirShares Elite’s Rosenburg. “I also go through our phone bills to keep them down to a minimum. If I see patterns of excessive abuse, we will have a meeting.” Since Eric Trope’s Staircase and Millwork Company is a product supplier to builders, he has become an inventory watchdog. “If the inventory has exceeded my forecast, I have to sit down and figure out where I went wrong,” says Trope. Johnnie Engesser of Quellan urges all cash managers to be involved with the company beyond bean counting. “The dot coms went bust because their (cash) managers were not involved and they let their companies spend like drunk sailors,” says Engesser.

Understanding how your cash comes and goes is key to keeping your business from getting into trouble. Whether you produce long or short-term cash plans, it is imperative to monitor each business transaction by implementing a detailed plan of action.

Tips for Cash Management Survival: *Whether it is a short-term or long-term plan, develop a strategy that works for you.
*As a cash manager, go beyond bean counting and become involved in the day-to-day activities within the organization.
*Stay in line within your budget by maintaining accurate cash-balance forecasts.

(c)2002 Robert J. Nebel Back to the resume Catalyst Magazine