Finance Management

Find out what cash control is and how to adopt it

admin • 17 Sep 2023

Cash control is a practice that should never cease to be part of a company's routine. And this, of course, regardless of its size or time in the market.

It is through this control that the manager will understand how much cash comes in and goes out, which facilitates good financial management. As you know, it is essential for the success of any business.

In this article, you will know everything about cash control. We will explain what it is, why it should be done and present a step-by-step guide to implementing this activity in the company's day-to-day operations.

Follow the article!

What Is Cash Control?

Cash control is the monitoring of all cash inflows and outflows from a company's accounts . Any and all financial transactions must be recorded by management, no matter how small.

Thus, it is possible to have, on a daily basis, a realistic view of how much money the company has available to meet its financial commitments. You also know how new investments are going and how to start generating profits for your investors.

What is Cash Control for?

Cash control must be done so that the manager knows where the money the company moves comes from and where it goes. Furthermore, it helps you understand how much is left in the accounts.

This way, it is possible to maintain financial control of the business, as it is essential for the maintenance of any company.

Cash control also allows the manager to quickly analyze the results obtained.

This way, it is possible to predict problems and anticipate their solutions, in addition to identifying fraud and making decisions more intelligently. And of course, all this always based on data.

Finally, good cash control also helps maintain working capital and gives the company greater negotiating capacity with its suppliers and customers.

How Does a Cash Control Work?

As we have seen,  cash control is used to monitor all financial transactions that occur in a business.

The process for operating cash control begins with opening the cash register at the beginning of the period, where the opening balance is recorded.

As sales are made, the amount is added to the cash register. Likewise, when payments or withdrawals of money occur, these outflows are recorded.

At the end of the period, the cash register is closed, comparing the recorded balance with the existing physical cash. Any differences must be investigated to identify possible errors or discrepancies.

Efficient cash control can also include issuing receipts, organizing invoices and carrying out bank reconciliations to ensure the accuracy of records.

What is the importance of cash control?

Cash control is a relatively simple activity. However, it is of great importance for a company to remain financially healthy and, thus, continue to operate and generate profit.

This control must be rigorous and is essential for the company to be aware of its expenses and be able to predict its growth trends.

Only in this way can the manager have access to truly realistic data about the business situation and make better decisions. Furthermore, control allows you to make more efficient financial planning for future periods.

Control VS cash flow

Cash flow is the set of financial movements that occur in a company's accounts. Many people confuse this concept with cash control , but there are some differences between the two.

Cash flow considers all of the company's finances, such as balances in its accounts, payments made, debts and financial commitments. In other words, it encompasses all the resources that the company has.

Cash control is a more immediate task, focused on day-to-day life. Both controls are important and must be carried out in a thorough and detailed manner!

What is the purpose of a cash flow?

The main objective of a cash flow is to provide a clear and accurate view of a company's cash inflows and outflows over a given period. It helps monitor financial health, control expenses, predict liquidity problems and make strategic decisions.

By analyzing cash flow, managers can identify revenue and expense patterns. Furthermore, they can plan investments, adjust payment and receipt deadlines, and anticipate working capital needs.

Furthermore, an efficient cash flow helps in evaluating the company's financial performance, allowing comparisons with previous periods and establishing goals for the future.

How to Control Cash?

Now that we've talked about the importance of cash control for the company's financial health, let's get down to practice. Next, you can check out the step-by-step we prepared!

Categorize Your Expenses

The first step towards effective cash control is to know well all the company's expenses. So, to do this, analyze the cash flow and separate them into categories: expenses with suppliers, employees, consumption bills, etc.

This way, you can start your cash control with a broad view of the use of business resources. This makes it easier to understand where the money goes and the percentage applied to each category.

List Your Earnings

Then, do the same thing with your recipes. Here, you can separate them into categories such as cash payments, installments, and investment gains, among others.

This way, you will know where the company's resources come from and, comparing it with expenses, you will quickly understand whether the company is operating in the red or not.

Check the Opening Balance

When opening the cash register, you should always check the opening cash balance. And you must make sure that this value corresponds to the value recorded at the closing of the cash register for the previous period.

Check out the origin and destination of money

Remember to always record all inflows and outflows of money, identifying the origin and destination. For example, if the origin is like sales, loans or other sources, and the destination is like supplier payments, operating expenses, or salaries, among others.

Keep an eye on payments

Monitor bill payments, suppliers and other expenses. Be sure to record these cash outflows properly in cash control .

Make Throws Correctly

When recording transactions, be accurate and detailed. Include information such as the date, amount, transaction description, and type of income or expense. This helps to have a complete history and makes later analysis easier.

Set a Period

Cash control must be done periodically and it is important that you define the time interval in which this will happen.

Depending on the specifics of the company, this could be a daily, weekly or monthly task. In some cases, it is necessary to check cash even more than once a day.

The smaller this interval, the greater the control over cash!

It is best for this task to be carried out daily. This way, it is possible to carry out more rigorous control, predict problems and identify errors before they harm other sectors of the company!

Register the Amounts Receivable

In addition to listing everything that is coming in and out of the company's accounts, it is also important to record amounts receivable in the future. These launches help you negotiate with suppliers, have more predictability about earnings and plan smarter!

Make Constant Adjustments

Once you've created a cash control routine, don't think the work is over. This is because, in addition to daily monitoring, it is necessary to keep an eye on the need to improve these processes.

In this way, management can carry out increasingly better, more complete and more accurate control. This way, the path to your goals can be followed more clearly.