How to Manage Cash Flow in Bill.com: Understanding Your Financial Position

Most likely everyone will agree managing cash flow is critical for business success.

Well, with Bill.com you can take control and easily understand your financial position...

In this post we'll see how to connect accounts, categorize transactions, monitor cash balances, leverage payment terms, enable online payments, and more using Bill.com's robust tools.

Introduction to Managing Cash Flow in Bill.com

Bill.com is a cloud-based software platform that helps small and mid-sized businesses manage their financial workflows, including accounts payable, accounts receivable, and cash flow tracking. By connecting to a business's bank accounts and importing transactions, Bill.com provides real-time visibility into cash flow.

This article will cover key features in Bill.com for understanding your financial position and managing cash flow, including:

Connecting Bank Accounts and Importing Transactions

To gain insight into your cash flow in Bill.com, the first step is linking your business bank accounts. This allows Bill.com to automatically pull in bank and credit card transactions each day. Importing transactions eliminates manual data entry and ensures your financial data is up-to-date.

Some tips for connecting accounts:

Bill.com supports connecting to thousands of U.S. financial institutions. Simply search for your bank and enter your online banking credentials.
You can connect multiple business accounts to consolidate transactions from different sources into one place.
New transactions will automatically sync from connected accounts each day. You can also manually click "Refresh" at any time to import the latest transactions.

Customizing Rules for Categorizing Transactions

As transactions are imported from your accounts, Bill.com will automatically categorize them based on customizable rules you set up.

For example, you can create rules to auto-categorize transactions from specific payees or containing certain keywords. This helps allocate transactions to appropriate categories like advertising, materials, payroll, etc.

Properly categorizing transactions allows you to clearly track spending by expense type. It also enables useful reporting on where your money is going to better understand your cash inflows and outflows.

Some tips for customizing categorization rules:

Take time to set up specific rules that match how vendors are named in your bank transactions. This helps auto-categorization work smoothly.
Review new transactions periodically to catch any that need to be manually re-categorized or have a rule created.
You can set rules to categorize transactions to specific customers, jobs, vendors, etc.

With bank account connections set up and rules configured, Bill.com provides real-time cash flow visibility and management capabilities to help understand your financial health.

How you manage your cash flow management?

Here are some best practices for managing cash flow effectively:

Monitor your cash flow closely. Review your income and expenses regularly to understand your business' cash inflows and outflows. This allows you to spot issues early and make adjustments.

Make projections frequently. Create a cash flow projection each month to forecast your future cash position. This helps you identify potential cash shortfalls in advance so you can take action.

Identify issues early. Pay attention to signs of cash flow problems, like invoices taking longer to pay or customers paying smaller amounts. Address issues quickly before they spiral.

Understand basic accounting. Learn key accounting concepts like the difference between profit and cash flow. This knowledge helps you make better financial decisions for your business.

Have an emergency backup plan. Develop a contingency plan for unexpected events that could impact your cash flow, like losing a big client. This gives you options to handle cash crunches.

Grow carefully. Balance growth with available cash reserves. Expand too quickly without adequate funding and you risk cash flow issues. Monitor growth plans against cash flow projections.

Invoice quickly. Bill clients as soon as work is completed to get paid faster. The quicker you invoice, the faster you get paid and the better your cash flow.

Use technology wisely and effectively. Leverage tools like accounting software and online invoicing to automate cash management processes. This saves time, minimizes errors, and improves cash flow visibility.

How do you determine cash flow position?

Determining your cash flow position is an important part of managing your finances in Bill.com. Here are the key steps:

Review your records: Log into Bill.com and access your financial records, including accounts receivable, accounts payable, and bank transactions. Review recent invoices, bills, and payments to understand money coming in and going out of your business.
Calculate total inflows and outflows: Add up all money flowing into your business from customer payments, deposits, etc. over a period of time. This is your total cash inflow. Also total up all money flowing out from paying bills, payroll, etc. This is your total cash outflow.
Subtract outflows from inflows: Take your total cash inflows and subtract your cash outflows. The result is your net cash flow for that period of time.
Add to cash flow statement balance: Take the net cash flow result and add it to the ending cash balance from your most recent cash flow statement. This gives you an updated view of your current cash position.

Monitoring your cash inflows and outflows in Bill.com and calculating your net position helps you understand your real-time financial situation so you can make informed business decisions. Recheck your cash flow position regularly to stay on top of your finances.

What is the financial position of the cash flow statement?

The cash flow statement measures a company's liquidity - how well it can generate cash to meet its short-term obligations. Specifically, it shows the sources and uses of a company's cash during a period, typically broken down into three categories:

Operating activities - This reflects cash generated from day-to-day business operations. Positive operating cash flow means the business is generating enough revenue to cover expenses.
Investing activities - This includes cash used to invest in long-term assets like property, equipment, or other investments. Negative values typically indicate the company is expanding capacity for future growth.
Financing activities - This covers cash from outside funding sources like investors or lenders. It also tracks repayment of debt principal. Positive values mean the company raised more cash than it paid back.

Analyzing the cash flow statement along with other reports can provide insight into a company's financial health and flexibility. Key things to assess:

Is operating cash flow consistent, growing over time, and exceeding capital expenditures? This suggests an efficient business model.
Is more cash coming in from financing than investments or debt repayments? This may indicate dependence on external funding.
Do cash balances remain stable or rise? Falling cash levels may raise concerns about liquidity problems.

Monitoring cash flow trends provides an early warning on potential issues, and helps gauge if a business can sustain operations through up and down cycles.

How do you monitor and manage cash flows?

Monitoring and managing your cash flow effectively is critical for any business. Here are some of the most effective ways to track and control your company's cash flow on a regular basis:

Use Bill.com to Automatically Track Cash Flow

Bill.com provides real-time cash flow tracking as bills and invoices are paid. You can instantly see what bills have been paid and monitor bank balances.
Set up automated reminders for upcoming bills so you can proactively manage cash outflows.
Integrate Bill.com with accounting software to automatically sync cash transactions. This eliminates manual data entry.

Create Detailed Cash Flow Statements

Produce detailed cash flow statements covering operating, investing, and financing activities. Break this down by week or month.
Compare actual cash flows to forecasts to identify any discrepancies for further analysis. Action can then be taken if targets aren't being met.

Optimize Billing Cycles

Structure customer billing to align with significant outflows like payroll and taxes. This matches cash inflows to major cash outflows.
Consider offering discounts for early payment of invoices to accelerate cash inflows. Just ensure profit margins remain healthy.

Proactively monitoring cash flow positions in Bill.com enables full control over the timing and amount of cash inflows and outflows. This supports effective cash flow management and positions the business for stability and growth.

Monitoring Cash Balances and Projections

The Cash Balance Dashboard

The cash balance dashboard in Bill.com provides an overview of real-time account balances across integrated bank accounts and credit cards. Key details shown include:

Current combined balances across all linked accounts
Breakdown of balances by individual accounts
Graphs showing changes over custom time ranges
Projected balances based on upcoming bills, invoices, and cash flow

Reviewing the cash balance dashboard regularly enables you to monitor actual cash positions, find trends in receipts and expenditures, and anticipate future surpluses or shortfalls.

Customizing Cash Flow Projections

Bill.com generates automated cash flow projections to estimate future account balances based on scheduled payments. To customize the projections:

Adjust assumptions for projected receipts to account for expected customer payments
Set custom periods for projections instead of default 30/60/90 days
Exclude irregular income/expenses to model normalized cash flow
Save multiple projection scenarios to compare different assumptions

Updating the underlying assumptions ensures your cash flow projections provide an accurate view of potential short-term positions. Monitoring multiple projections can highlight vulnerabilities and support contingency planning.

Overall, Bill.com provides robust tools for tracking real-time cash balances and modeling projected positions. Regularly reviewing the dashboards and reports enables tighter cash management and more informed decision making.

Managing Bills and Payments

Bill.com provides tools to streamline and automate accounts payable workflows to help businesses manage cash flow efficiently.

Approval Workflows for Payments

You can set up approval chains in Bill.com to control payment outflows. For example:

Require approvals from managers for payments over a set dollar amount. This prevents unauthorized large expenditures.
Create a 2-step or 3-step approval flow before payments are issued. This ensures proper oversight on cash outflows.
Set up email notifications to alert the next approver when a bill is pending approval. This makes the process smooth and timely.
View audit trails showing who approved each payment and when. This improves transparency and accountability.

By customizing approval chains, you gain visibility and control over payments to align with internal policies.

Leveraging Payment Terms

Bill.com enables you to take full advantage of vendor payment terms to manage cash flow. You can:

Review due dates for bills and schedule payments accordingly. Paying later within term helps preserve capital longer.
Prioritize which bills to pay first based on due dates and early pay discounts. Optimize payment order to reduce expenses.
Automate payment scheduling based on payment terms. Bills get paid automatically on their due dates for efficiency.
See projected cash outflows over the next months based on payment schedules. This helps forecast cash flow needs.

Optimizing payment timelines around terms is an easy way to hang on to cash longer while staying in good standing with vendors. Bill.com provides visibility and tools to accomplish this.

Getting Paid Faster with Online Invoicing

Online invoicing through Bill.com can help businesses get paid faster by customers. Here are some key features that enable quicker payments:

Customizing Online Invoice Templates

You can customize the look and feel of your online Bill.com invoices to match your business branding. This promotes professionalism and familiarity for customers paying invoices.

Upload your business logo to brand invoice templates
Select color themes and fonts that align to your business style guide
Preview customized invoice designs before sending to customers

Branded online invoices lend legitimacy and make customers more likely to pay promptly.

Enabling Online Payments

Activating online payment options through Bill.com invoices accelerates the payment process.

Enable credit card payments via Stripe integration. Customers can securely pay invoices online.
Offer ACH bank payments from checking accounts. Customers link accounts to pay directly from bank.
Send payment reminders to customers with outstanding invoices. Prompt polite reminders reduce late payments.

Online payments provide more flexibility over mailing checks. Customers can pay 24/7 and funds settle faster into your account. Reducing payment friction gets you paid quicker.

Reconciling Transactions

Reconciling transactions in Bill.com can streamline your accounting workflows. This section will overview two key tools that simplify the process of pairing imported bank transactions with related bills and invoices.

Reviewing Unmatched Transactions

The Unmatched Transactions page provides a unified interface to efficiently review transactions that did not automatically pair with bills or invoices. Here are some tips for leveraging this tool:

Filter unmatched transactions by date range, amount, or keyword to quickly narrow down the list. This makes it easier to focus your review.
Click on any unmatched transaction to open a side panel with key details. Review the vendor, date, amount and memo to determine if you can manually match it to an existing bill or invoice.
Select one or more transactions, then click "Match" to pair them with the correct record. Bill.com will move these matched transactions to the appropriate bill or invoice.
For ambiguous unmatched transactions, add a note or tag for follow up. You can export all unmatched transactions to share with your accounting team.

Regularly reviewing and resolving unmatched transactions ensures your financial records accurately reflect all business activity.

Leveraging Automated Matching

Bill.com uses preset rules to automatically match common cash inflows like customer payments. You can also create custom rules to match expenses like rent, utilities bills, etc.

Navigate to “Settings” > “Automatic Matching” to view existing rules. The interface shows you which rules are active along with sample data they will match.
Click “+ Add new rule” and select either Cash Inflow or Cash Outflow to set up a new automatic match. Provide a description and configure your match criteria.
For cash inflows, you may match on customer name, invoice numbers, or amounts within a date range.
For expenses, utilities and rent often have predictable invoice numbers or amounts each month that can be auto-matched.

Set up 2-3 key rules appropriate for your business to reduce manual reconciliation work. Monitor auto-matched transactions to ensure accuracy over time. Tune your rules as needed.

Leveraging Bill.com's automated matching and manually reviewing unmatched transactions will simplify reconciling your cash transactions each period. This helps produce timely and accurate financial reporting.

Monitoring Key Cash Flow Metrics

As a staffing agency focusing on accounting and finance roles, monitoring key cash flow metrics can provide valuable insights into the financial health and efficiency of your business. Here are some ways to track critical cash flow KPIs in Bill.com to inform strategic decisions:

Cash Cycle Analytics

The cash conversion cycle - comprised of metrics like days sales outstanding (DSO) and payables turnover rate - is a useful measure of working capital efficiency. By creating custom reports in Bill.com, you can:

Calculate DSO to assess how quickly client invoices are being paid. A lower, improving DSO indicates healthier cash flow.
Monitor accounts payable turnover to measure how rapidly you pay suppliers. Faster payables turnover conserves cash.
Compare turnover rates over time to identify positive or negative trends. This helps pinpoint issues requiring action.

Custom Reports

Bill.com enables custom reporting to track specific cash flow metrics relevant to your agency. You can:

Build a cash flow statement report with income, operating expenses, and capital expenditures over select periods to forecast cash positions.
Create an aging receivables report to view total uncollected invoices and average invoice ages. This determines collection efficiency.
Design a vendor payments report to analyze payment history with independent contractors supplying candidates.

Careful monitoring of these metrics informs decisions around client payment terms, contractor agreements, and cash flow optimization. It keeps your agency financially healthy.

Conclusion and Next Steps

Bill.com provides a powerful platform for managing cash flow and streamlining financial operations. Key benefits include:

Real-time visibility into account balances and cash flow position to optimize decisions
Automated workflows for accounts payable and receivable to accelerate processes
Integration with accounting software for efficient syncing of transaction data
Customizable rules and approvals to maintain control over spending

To fully leverage Bill.com for your business, focus on tailoring the configuration based on your needs:

Carefully map approval roles and rules to match your existing processes
Set up integrations with your accounting platform to enable automatic syncing
Take advantage of custom fields and tags to track critical metadata
Build custom workflows optimized for your payables and receivables
Use reporting dashboards to gain visibility into past trends and future projections

Properly configuring Bill.com upfront will ensure you maximize the benefits over the long term. The platform's flexibility makes it a powerful cash flow management tool for all types of businesses.