The Importance Of Cash Management

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Cash management is seen as one of the key aspects of efficient working capital management. It involves planning and controlling cash flow of the business and cash balances held by a business (Antiwi et.al. 2015) . It deals with balancing cash inflows of the business with that of its cash outflows (Agamata 2013). Speed-up of cash collection and delaying cash payment are indicators of a good cash management. Roque (2016) said that cash management involves the maintenance of the appropriate level of cash and investment in marketable securities to meet the firm's cash requirements and to maximize income on idle funds. According to Brigham et.al. the term cash is often means as currency and demand deposit.
John Maynard Keynes divided the demand …show more content…

According to Walusimbi (2011), the business should also improve their cash management policies by adopting the most appropriate policies like banking, investing, budgeting and planning for cash requirements.
According to Agamata (2013) cash budget is an indispensable tool in managing cash flow. Cash flow management magnifies the inevitable relevance of budgeted cash flow for a year. This budget provides working details on when is cash greater than the need for the period and when is additional cash needed to sustain the liquidity requirements for a given period. Cash flows management predetermines the excess cash inflow and deficit in a given period.
Cash management is a broad term that refers to the collection, concentration and disbursements of cash. It is particularly important for new and growing business. Cash collection is a function of accounts receivable, it is the recovery of cash from business or individual with which the company is issued in invoice (Ross). The most obvious way of bringing forward cash inflows, would be to press debtors for earlier payment although this policy will result in goodwill and problems with customers. According to Gitman (2008) as cited by Damiyano, the objective of managing accounts receivable is to collect cash as quickly as possible without losing sales from high pressure collection

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