Cash management is one of the most important aspects of business management. If you don’t understand how cash flows through your business, where your money is being spent, or how much money you have in your backroom, you’re doing your business a disservice.
Understanding how money flows through your business is one of the keys to keeping your business successful. Having a money trail is also imperative when talking about cash management because it ensures accountability.
What Is a Money Trail?
Have you ever heard the phrase “follow the money?” It’s the idea that if you want to figure out someone’s motivation behind an act, you look to see who stood to benefit from it.
A money trail exists between two parties when a transaction is made. When someone is up to no good, you follow the money trail to find out the truth. For the average business owner, having a money trail ensures that the proper authorities can track your money and transactions to make sure your business is legal and compliant. It also keeps your employees accountable when handling your cash.
Taxes and Audits
Every business should be keeping records of their transactions and receipts, and copies of their books for seven years. If anything is out of order when your business pays its taxes, it can lead to an audit from the CRA.
When your business is audited, the CRA can ask for all of your financial paperwork for the last seven years. This is why it’s important that you have it readily available. When the CRA audits you, they’re looking at the money trail. The CRA wants to make sure everything your business is doing is legal and that there’s proper documentation. When you don’t have that documentation, it looks poorly on your business. Good cash management practices ensure your employees are accountable and handling your cash properly, you have the proper paperwork, you have a money trail that’s easy to track.
All knowledge is power when it comes to your business. The more you understand about how your business functions, where money is spent, who your customers are, and what you’re selling, the better chance at success your business has. Gaining that knowledge all comes down to reporting and analytics.
It’s important that you’re able to track all of these different business variables, which is why understanding your business’s money trail is so important. When you’re able to see where money is spent and where errors are occurring, you’re able to make better decisions for your business’s success.
It’s impossible to track everything you need to know by hand. Not to mention, it’s easier to fake information when it’s all done by hand. These are two reasons why it’s important to automate your cash management system. If you’re looking to automate your system, you can speak to a cash management solutions provider about your business’s needs. You can also invest in different kinds of hardware such as a smart safe and cash recycler to gain access to analytics and reporting.
Understanding the money aspect of your business is vital to the continued success of your business. If you don’t understand how money flows in your business, and if you don’t have a good cash management system in place, your business will suffer.