Just like other areas of your life, many of us spend the last months of the year reviewing the past 12 months and brainstorming ways to improve in the next. Your personal relationships and physique might be perfect, but how do you decide if you need to boost your management of your business financials...beyond visiting your accountant from time to time to help you see the big picture?

The first step is to gather and analyze how much financial data you can access quickly to know whether you have your finger on the pulse of your financials. If not, maybe it's time to invest in some professional development - and yes, possibly software - to up your game in the new year.

‍How much effort does it take to answer the following questions - and can you answer them accurately?

‍• What is my cash balance right now?

• What money is coming in and going out this month, and roughly how much?

• When do I expect the payments to show in my bank account?

• What do I expect my cash balance to be in three months? Six months?

• Where can I get this information if I need it in a hurry and how hard is it to access?

What is my cash balance right now?

Your cash balance right now is probably not what your bank balance reflects. As you've experienced in the past, the posted amount in your account doesn't necessarily include pending transactions, cheques waiting to clear, monies in transit, slow-to-process vendors, NSF situations, international management or conversion or a myriad of other chewy circumstances.

In fact, checking your bank balance, even a few times daily, can lead you to be the cause of a sticky situation as well as being left to deal with others' impacts on your money.

What money is coming in and going out this month, and roughly how much?

24 hours a day, money is flowing in and out of your bank account at the whim of bank tellers and automated processes all to manage your accounts payable (AP) and accounts receivable (AR). Just like with the cash balance question above, there are likely cheques that haven't cleared, expenses deferred to a credit card bill that will be paid later, automatic deposits and withdrawals that are scheduled in the near-term that will have a big impact on your bank account but that aren't showing up yet.

Can you put your finger on the amount of debits and credits that have taken place over the last 30 days? How about 60 or 90 days back in time, or into the future as you wait for vendors and final sales to process?

When do I expect payments to show in my bank account?

Interpret this one as loosely or formally as your business dictates. The answer will depend on your bank, its practices, your clients and how promptly they pay, your AP/AR staff's processing timelines, your clients'AP/AR staff's processing times and criteria for invoicing and payment, holidays and bank processing times...

This list could go on for a while but the point we're trying to make is that if you don't know when payments are coming in, then how can you be certain you won't dip into overdraft to help manage cash flow?

What do I expect my cash balance to be in three months? Six months?

So many factors will affect your cash flow over the next days, weeks and months, and these transactions will have a major impact on your business.

Looking at your cash flow projection this quarter or six months out and even predicting your sales for the rest of your fiscal year changes the perspective of your business.

There are near-term issues that need to be addressed, such as getting paid on time, covering large bills and managing potential cash crunches. But longer term views can present a very different picture. You may have healthy cash flow right now but have not filled your sales pipeline - resulting in a major dry spell later.

Or maybe you have a significant amount of business coming your way in the next few months but you need to prepare and potentially expand now to meet the coming need.

Where can I get this information if I need it in a hurry and how hard is it to access?

Likely, this article has been a bit of a mental exercise to reveal a detailed picture of your cash flow - the ease at which you gathered accurate information to complete our informal questionnaire tells the real tale: if it was a pain to gather, involved multiple staff members and possibly your accountant, perhaps it's time to revamp in the new year and hit the gas when it comes to cash flow management.

Finally, consider the conundrum of software. While there is a learning curve associated with even the simplest software, there comes a point where ‘make-do’ solutions like a spreadsheet may not work effectively anymore.

When a business expands in any respect, its value and your personal value, the amount of time, and the level of complication for the calculations you run starts to rise at a geometric rate. In previous years a spreadsheet may have suited the needs of your business but year by year it grows more complicated as your business continues to grow and you lose the linear element that makes it time- and cost-effective to chart financials to a spreadsheet.

In short, odds are that it's a great time to try something new to manage your cash flow - it'll help you see next year clearly, and where you're headed after January 1.

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