Cash Management Paper

Abstract

Implementing cash management strategies can initiate immense ways to maximize cash flow in a firm. Assessing the current firm’s cash position and evaluating proper investment account options can assist a firm properly in accurately assessing and making fairly reliable predictions at maintaining expenses. Important tools are utilized when describing business performance and financial calculations to meet the expected objectives the firm.

Cash Management Paper

In today’s world, reliable information is imperative for decision making that involves the financing and controlling of assets. Efficient cash management processes are needed to carry out business in our intense economic world of competition and instability. Without the essential tools for allocating funds properly, a firm may not be able to pay their suppliers, employees, or the financers.

Management Techniques

Superior management capabilities and tools will assist in the processing and reconciliation needs of the individual firm. Businesses engage in the production of revenue, where they are constantly generating and spending cash. Being aware of the various techniques can assist the management of the cash flow, since it may be unpredictable and uneven. Managing current assets have various forms that assist in managing the cash, marketable securities, accounts receivable, and inventory.

Obtaining accurate knowledge is to asses the current cash throughout can place the firm in a position to make reliable predictions at specific key intervals and meet the company’s expenses. Maximizing efficient cash flow can help in billing, collections and payable systems.. “It's necessary to ensure that your company is using its assets and liabilities effectively, is able to meet current obligations and borrow funds when necessary, and is financially prepared to support future operations” (Small Business Learning).

Float is a cash management technique that illustrates the difference of the recorded sum and the credited sum of the firm’s balances. Float is able to be managed through a combination of strategies such as the disbursement and collection, based on the time delays in mailings, processing, and the clearing of checks through the banking network. Float allows a firm to pay off some of the account payables without having the funds available at the present time, acknowledging that the firm will have the funds after the check clears through the banking network and is recognized in the account.

The improving of collection of funds, a firm may wish to use the technique of a lockbox system. After the clearance of the checks in the collection, the funds can be represented as available within a 24 hour window. This speedy collection of a lockbox allows the firm to have funds immediately available for corporate use.

In our society, electronic funds transfer offers another tool to initiate the transfer of funds without the use of writing a check, simplifying the collection process. Maintaining computerized cash management system allows financial management to locate and verify the funds that are present to the company for any interest in overnight investments. This tool allows float to be non existent since the costs are already being deducted from the account at the time of process. “The combined volume of commercial and government transactions through automated clearinghouses is over 4.5 billion and accounts for over $14 trillion in electronic funds transfers” (Block, Stanley B., 2005).

In similarity of transfer funds electronically, corporations also have the availability transferring funds country to country. This process is known as international cash management with access to high interest rates with short-term investments in marketable securities that may be only available in a particular country. The international cash management differs from each country to country, but offers efficient cash management through the international boundaries and time zones. Companies residing in the United States can borrow dollars from London banks or any other major money market center. “When the economy is strong, companies can lapse into sloppy cash management practices” (Jill Andresky Fraser, 1998). Two types of sweep

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