At work, we have recently gotten a lot better about forecasting our cash flow, but one thing that is still missing in my financial tool belt is a method for managing our cash. My outsourced accountants have told me that I can't track cash in various bank accounts via my P&L, and after a bit that started to make sense to me. My balance sheet might be a place I could better define and track things, but that's only if I actually have AP commitments that I need to honor. Its not really the place for pulling money aside to for a future spend. So, I reached out to my CPA friend who said, "Just use a spreadsheet." Well, ok, I can do that.
I have 3 bank accounts: operations, deposits, and savings. We receive our funds from sales in deposits, and then maintain working cash in ops, and have a traditional savings type account. Operations and Deposits are both relatively volitile accounts, and I'm not super concern about monitoring their activity (a luxery of being profitable I believe). I am rather concerned about the money that is sitting in our Savings account. Why is it there, and what is it there for?
A Naive Process
Ideally, this would behave like my Simple personal bank account with Goals and Expenses. So that is the mental model I'll be working from. Again, I'm not super concerned about expenses in this case, so I really want to focus on the "Goals" aspect of my simple account. For that, we can start with a manual process of tracking the funds in a spreadsheet, along with a weekly sweep of money from our deposits account into either operations or savings.
The Basic Table
I'm going to keep it super simple and have a table that roughly looks like:
obvi: the dollar amounts here are for demonstration purposes only
Ok, so step one could be as simple as defining some uses of this money, like so.
Just sitting down and working through this process is already giving me a clearer sense of what I have and what its for. Even more importantly is that it lead to a frank and real conversation with my CEO about the money we have and what its for. We were able to uncover some small but important details in how we were each approaching our cash management processes which I think will lead to better business decisions between the both of us.
I'm not sure how well this will scale out in the end, but I should be able to work with the friction that I feel and course correct as needed. Additionally, as usual, I'll be seeking out the counsel of fellow business people to see what else can be learned.