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  • Melissa Morales

Cash Planning Basics

Updated: Nov 5, 2019

Let’s get back to basics. How much cash does your business have available for operations? Is your business profitable? Responses to these questions highlight whether you are focusing on cash planning for your business. If you can’t answer these questions, reset your focus today. Seriously, it is critical. Part of Merigold’s strategy for Client success is assisting with cash planning. This is first done by providing standardized and accurate accounting support, the most important foundation of a business. Regular cash planning isn’t always a consideration and we all know that business owners or managers must focus on increasing cash reserves. This may seem obvious, but surprisingly most Clients don’t focus on this aspect of managing their business.


When reviewing the business financial statements, you must consider cash flow. Did you know that cash flow is not profit? Cash flow is a cumulation of all activities, including profit, that drive your business operations. The necessity of accurate accounting is to provide data that ultimately produces financial and cash flow statements that represent what is occurring in your operations that impact cash.


The changes in balance sheet accounts, specifically accounts receivable (invoices sent to customers/clients) and accounts payable (cost of goods sold/operating expenses) are critical components to managing your business operations. You need to be in tune with the aging of both and how fast the business is collecting and paying. These two accounts house many important issues for Clients and are often overlooked when doing cash planning.


Cash planning should include trending of historical changes that will provide a base line for future expectations. If your business is growing, include estimates for new revenue and associated costs/expenses. At a minimum, plan to regularly review cash balances and changes. This includes:

  • Daily review of cash activity, including collections and expenses;

  • Semi-monthly review of accounts receivable and accounts payable balances;

  • Monthly bank reconciliation and cash flow statement review.

Your business should have a rolling twelve-month cash forecast for planning. Also, remember to allocate cash reserves in the untimely event that a new customer falls out or your business has an unexpected expense.


Your business is either flushed with or trying to accumulate cash. Either way, you need to understand your businesses cash position. Contact Merigold today for a free consultation to find out how we can assist you with getting your foundation set for cash planning. Email us at contact@merigoldpartners.com or call us at 281.747.3017.

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Merigold Partners, LLC is not a CPA firm.

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