Accounts & Finance Department Tasks-2

6. Cash Flow Management

• A lot of businesses get into trouble for poor cash flow management.
• Every month get the next three months’ cash flow statement prepared by the accounts department. This should project the incoming and outgoing cash from various sources.
• Also check the previous month’s projected versus actual cash flow statement and the reasons for the deviation, if any.
• Review the projected cash flow and previous month’s cash flow statements every month without fail.
• Monitor the cash flow situation closely and do the needful to ensure smooth flow of cash.
• Keep the contingency plan and arrangements ready to take care of the unforeseen cash flow situations.
• Ensure that the use of contingency arrangement is needed only occasionally and is not regular.

7. Regular Reconciliation of Balances

• Make it a practice to cross check various balances regularly e.g.
  • Cash balances
  • Bank balances
  • Accounts payables (creditors)
  • Accounts receivables (debtors)
  • Stock on paper versus physical (Raw material, Work-in-progress, finished goods)
  • Loans (Given and taken)
  • Investment accounts
• Cash balances must be tallied daily.
• Depending upon the volume and importance of the other matters, the frequency of such reconciliations should be decided.
• Keep a practice of getting ledger confirmations done with outside agencies (debtors / creditors) every quarter or every half year. This will keep the confusion and disputes to the minimum.

8. Bank Accounts

• Operate bank accounts with the banks which make our business operations easier and faster.
• Keep the number of company bank accounts as less as possible. More bank accounts complicate the matters.
• If loans or other financing requirements need more accounts to be opened, do the same if required.
• Give somebody a responsibility to ensure proper balances in all bank accounts.
• Always ensure the bank accounts are regularly reconciled.
• Make a rule that cheques are not issued before sufficient clear balance is ensured in the respective bank account.
• Make use of technology in banking as much as possible. This can save a lot of time, energy and money.
• If Internet banking is used in any bank, ensure that the transaction rights are given to the right persons and proper authorization process is in place.
• Others should be given only viewing rights on Internet banking sites for non-payment operations.
• Regularly monitor payments being made through Internet or through office credit cards.
• Make sure that there are no blank cheques signed lying anywhere in the office. If you have to do this, ensure proper safety of the same.
• Try to have more than one signatories to the company bank accounts. So, if one person is not available, his signature can be taken in advance on cheques and the other person can sign them only when payment is to be made.

9. Collection of Receivables

• For a business to run smoothly with healthy cash flow, we should ensure that all receivables are collected in time.
• Remember, if we are alert, outstanding receivables will not pile up. If we follow-up in time, the debtors pay up in most of the cases.
• Many delayed collection issues arise due to invoice or some other documents not being received by the customer or there may be some errors and corrections which may be required to be done in the same.
• Prepare and dispatch the invoice to the customer as soon as it is made.
• Confirm with the customer for receiving the invoice and its correctness. If any discrepancy is reported, get it corrected properly and promptly.
• As soon as the specified credit period is over, we must ensure that the debtor is followed up by us for payment. If we do not follow-up, the debtors may think that we are not in hurry to receive the payment and they may be encouraged to delay the payment.

10. Payments

• In payments, we must follow one simple rule: Be prompt in making due payments on time.
• Set up a process where the payables are tracked properly and paid as per the schedule.
• All the payable bills must be checked properly.
• If there is any errors or corrections to be made in the vendor’s bill, inform them well in advance and get it resolved satisfactorily. We should not wait till the payment date for such corrections and then delay the payment till the corrections are made by the vendor.
• We must implement a payment process within the company and the vendors must know where they have to send the bill and with whom they should follow-up for payment.
• The various authorizations and supporting documents should be obtained well in advance such that they don’t delay the payment.
• Make sure that our vendors do not have to struggle to get payment from our company. Accounts departments at some companies enjoy harassing the vendors for payments. This damages the reputation of our company and spoils our relationships with the vendors. We should sensitize our accounts department towards this.
• Remember, we are paying them for the goods or services received from them and by paying them their dues we are not obliging them in any way. This should be made clear to everybody involved in the payment process.
• In payments, the ideal situation is when we send the payment directly to the receiver’s account or through cheque without their follow-up. Vendors love to work with such customers and hate to work with those who make them feel like a beggar to collect the due payments.
• If we maintain proper payment track record to the vendors, they will be happy working with us and may be helpful to us if needed sometimes.
• Smaller cash payments must be processed through petty cash method. Here also, vouchers and proper authorization process must be followed.

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