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Cash management

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DG F.
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documents in English
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term papers
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3 pages
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  1. Introduction
  2. Cash management record-keeping system
  3. Importance of cash
  4. The financial future of an organization
  5. Importance of credit cards and lines
  6. Factoring
  7. Conclusion
  8. References

Similar to the absence of water to anything living, the absence of cash to the business means death?slow, torturous, physically painful, and mentally agonizing? (Managing, 2003, p.1). A flourishing business rests on sound cash management techniques with solid cash flow. One cannot determine the profitability of a business or its financial condition without good cash management techniques. An entity's survival depends not only on healthy cash management but on positive long term cash flow. Whether on paper or a software computer program a basic cash management record-keeping system needs accounts receivable records, accounts payable records, a basic journal for transactions records, payroll records, inventory records, and petty cash records.

[...] It can borrow from creditors using cash lines or better credit terms. Or it can borrow on the power of owed monies owed the business?like factoring or invoice discounting. All these methods generate working capital. In comparison, all these methods are relatively inexpensive and simple to set-up (short-term only). Simply, an overdraft?a relatively common solution-- provides the best solution if the entity's money need is short term. overdraft can be quickly arranged. It is the agreed amount that your bank will permit your company to borrow without notice and, in turn, you will pay interest on the sum borrowed. [...]


[...] (This develops a well-balanced cash flow plan.) ?Cash management involves control over the receipt and payment of cash so as to minimize non-earning cash balances? (Block & Hirt p.1). A plan (to increase cash reserves) to attain positive cash flow includes: product price adjustment, sales increase, credit requirement tightening, quick inventory turnover, expenses management, acquiring short-term loans, and collecting receivables. Even though a company had better keep adequate cash on hand for expenses coverage, it should invest extra cash in an easily obtained, interest- bearing, low-risk account?like a short-term certificate of deposit, savings account or Treasury bill. [...]

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