How to Manage My Cash


For the good management of your SME, you must evaluate in a realistic way and foresee the cash shifts, in “positive” or in “negative”, according to the receipts which it receives or the disbursements which it operates.

So, you need to estimate your working capital requirement as precisely as possible. This indicator is fundamental: the working capital requirement (WCR) measures the gap between receipts and expenses. The WCR allows you to know, particularly in the event of a cash deficit, the number of funds to be mobilized.

In the event of a negative WCR (this means that you have a surplus of cash), your SME may on the contrary place its available surpluses and thus make their returns grow.

Depending on the activity, seasonal variability, or the size of your business, the estimates will not have to be provided at the same frequency. However, except in special cases, a large part of SMEs operate with monthly and quarterly cash forecasts.

Optimizing management
Like most businesses, your SME certainly experiences a lag in its operating cycle between the expenses incurred and the revenues that are not yet collected. If your available cash is negative, your SME must mobilize funds in order to avoid being in a difficult situation (delays, incidents, or even cessation of payment).

So you can first look for practical solutions to reduce the gap between your expenses and the collection of your revenues. For example, you can review with your customers the payment deadline for invoices, but also anticipate late situations by rigorously managing the payment of your invoices to prevent them from turning into unpaid invoices.

Depending on the size of your structure and your organization, you can choose between using your internal resources (accounting or management service, and possibly treasurer for the largest SMEs) or outsourcing this service to external stakeholders (your accountant or specialized companies).

To optimize your management, you can also try to make the dates of certain disbursements coincide as well as possible with the receipt of receipts: this way your cash gaps can be reduced. For example, you can negotiate payment dates with your suppliers, within the framework of legal obligations, or even review the payment dates of your customers.

Financing in the short term
If short-term financing is necessary to cover the cash needs of your SME, different solutions are available to you. They can be distinguished into 2 main categories: cash loans and loans by mobilization of receivables.

For larger SMEs whose organization is already highly structured, as for mid-caps and large companies, financing solutions by the financial markets can meet cash flow needs.
Regarding most SMEs, the main short-term financing that can be mobilized are the lines of authorizations and cash loans:

  • Credit solutions allowing your SME to operate with a debit bank account exist. You will discuss with your bank advisor to fix the amount to set up according to the situation of your current business and your cash flow forecast. The cost includes interest charges or interest charges.
  • checkout facility: its use is exceptional, such as to cover a one-off cash shortage, for example, an urgent and unforeseen payment or a late payment of an invoice by a customer;
  • authorized overdraft: it may be more suitable if your cash requirement is more regular. The overdraft authorization granted to you corresponds to a maximum debit amount, not to be exceeded.
  • This authorization is generally renewed each year and calculated for an amount related to your turnover.
  • You can also have access to other types of short-term financing, also called cash lines. These credits are adapted according to the needs of your business, whether they are regular (for example payment terms granted to customers, stocks of goods, etc.) or more punctual (for example a large contract with a customer having a strong impact. on turnover). You will have access to a credit line that can be used, which you can use in whole or in part to balance your cash flow needs.

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