Cash includes petty cash, till box cash, cash in bank accounts, and the checks pending for deposit. For the small business owner, cash is critical to successful operation of the business. It is the blood in the business that allows it to breath and continue operations. It is important for the owner to understand cash management.

Bookkeeping – Bank Reconciliations (Lesson 47)

An essential task of bookkeeping is making sure the ledger accounts for cash reconcile to the bank.   Your average person believes that this is a monthly task.    Well in the private world, this may be true.   But in small business, this is a daily task.   If performed daily, it shouldn’t take...

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Bookkeeping – Cash Disbursements (Lesson 45)

Cash disbursements is the process of remitting payment to vendors, suppliers and third party contractual obligations.   Better managed offices pay bills in regular cycles including weekly and monthly obligations.   Preparation, reconciliation and actual check writing is commonly referred to as cash disbursements.   For the bookkeeper, this is a function of the day-to-day...

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Using Cash in Construction

There is a notion in business that using cash to pay for materials or service is illegal.  IT IS NOT ILLEGAL TO PAY FOR MATERIALS OR SERVICE WITH CASH.  It is illegal to do this if you do not properly document the transaction.  This is especially true in the construction industry. This article is going...

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Working Capital

Treasury Stock

Cash is the lifeblood of every business. Without cash a business operation can come to a standstill. Cash is one component of working capital, a term referring to current assets (Gross Working Capital) less payables and accrued expenses. The term is usually used in finance referring to the dollar value of flexibility management has to address expansion or …

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Insolvency and Bankruptcy – Know the Difference

Every business owner needs to know the difference between insolvency and bankruptcy.  Often these two terms are misunderstood and improperly used in conversation.  You need to know their correct meaning because both are used in civil law and both have different issues to address during the process.  In addition, understanding these two terms builds a...

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Quick Ratio – Definition, Explanation and Proper Use

Quick Ratio

The quick ratio is a formula used in business to identify the ability of a business to pay its current liabilities.  It is also known as the ‘Acid Test’ formula (ratio).  In the large markets this formula is one of the financial industry ratios used to value the stock of a corporation.  In the arena of the small business, you should only use this ratio as a means to gauge ability to pay your bills right now.

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