Anti Essays :: Free "Cash Management" Essay
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Submitted by dustycat on November 9, 2008
Cash is the life blood of a business. But how does a company know if they have too cash little or too cash much on hand? How do they manage their cash flow? In the new century with global implications and the ever changing electronic age, how can a finance manager get the most out of the profits of the company? The following concepts will be discussed to try to answer these questions: cash management techniques and methods of short-term financing.
Cash flow is determined by payments received from customers, the speed that creditors and suppliers process payments made to them and how well the banking system works. The main concern when managing the cash flow cycle is to synchronize the inflows and outflows. (Block & Hirt, 2004) One way to achieve this is called float. This is where time delays in the mailing, processing and clearing of checks allows for the use of funds not yet deposited from customers and payments made to suppliers or creditors. For customer payments, a lockbox system can be used. A company uses local post office boxes where payments are received based on where the customer lives. Then a local bank makes daily pick ups of the payments received and processes the checks within a 24 hour period. This allows the company to have the deposits made to their account much quicker than if the payments were mailed to the company and processed.
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