How is Your RIA Firm’s Cash Flow Management?

How is Your RIA Firm’s Cash Flow Management? - Elevate CPA Group

When you’re focused on your clients’ needs, it can be easy to neglect those of your business. This is especially true when it comes to monitoring your RIA firm’s cash flow management. If you’re not keeping track of dollars coming in and dollars coming out, you can quickly get under water.

Here are a few things to consider when managing your RIA firm’s cash flow.

What should you be looking for?

There are three types of cash flow you should monitor:

  1. Operating cash flow—An at-a-glance view of your firm’s day-to-day cash flow.
  2. Cash flow forecast—An estimate of your firm’s cash flow over the next one to six months. It won’t be spot on, but it will at least give you something to measure against.
  3. Free cash flow—Resources available for distribution to your firm’s owners. In other words, income flows to you.

How often should you be looking at your RIA firm’s cash flow?

Knowing your firm’s numbers makes you a stronger leader—and puts your RIA firm in a better position for growth. Ideally, you’re looking at your firm’s cash flow every day or at least every month. If you check your numbers regularly, and they’re not where they should be, you can address the issue right away. Be sure to also verify your RIA firm’s AUM calculation, so you can make sure the dollars coming in are at the correct amount.

Are you prepared to pay taxes?

If you know your projected income, you can calculate the estimated tax your RIA firm will have to pay. Tax deadlines can sneak up very quickly—be sure to track which deadlines are on the horizon as well as which payments are due. Avoid a last-minute tax crunch by setting aside cash for payments.

What purchases do you expect to make?

Knowing your RIA firm’s projected income can also help you determine which purchases to make and when. If you have a large expense coming up, you might wish to establish a line of credit through your bank. Consider establishing your line of credit as soon as possible, so you don’t have to scramble to get it in place.

Also, make sure you’ve covered your RIA firm’s future cash needs for growth. Earmark money for marketing, equipment, loan payments, etc., so you don’t run into surprises.

Do you have the cash flow support you need?

Tracking your cash flow management can be time-consuming and, at times, confusing. At Elevate, we help RIA firms understand and project short-term and long-term cash flow, so they can stay focused on their clients and growth initiatives. We can also advise on RIA firm expenses and on recalculating your income from the custodian. For instance, if you’re going to buy something and the price is X, does it make sense to pay X? We lend our perspective, so you can make an informed decision.

If you have questions or would like to learn more about working with Elevate, schedule your complimentary consultation today.