At last week’s breakfast in Sunnyvale Rick Kadet offered a list of good cash management practices:
- Really know your current cash balance. Reconcile your accounts and always consider outstanding payments.
- Centralize and pre-approve any spending. Keep records of authorized spending: purchase orders, travel, offer letters, expense re-imbursement, outside consultants.
- This also minimizes mis-understandings with your co-founders
- Have clear “not to exceed” limits on outside projects: break them into phases with clear deliverables, tie payments to results.
- Once a month close the books and do an income statement and balance sheet.
- Pay close attention to sales compensation and commission plans to ensure you are incentivizing the right behaviors.
- The founders’ actions set the tone with employees and vendors: stress frugality but don’t micro-manage or unintentionally communicate a lack of trust.