Cash Management

Cash management is a term used of how financial managers manage money. It’s a responsibility for financial manager to run an effective organization and the task is to maximize an organization value, and the value is determined on the cash flow. Cash management is a significant concept in success of an organization. If cash management is not a significant value of an organization, it will undermine the organization short- term stability and its long-term continuation. Cash management in handled though the cash-flow cycle. This cycle relies on when and how funds are collected as well as paid out and how fast the banking system is (Block and Hirt, 2004). For instance if a supplier cashes a check too soon, and the bank is slow to process checks from customers, there may be a negative balance of cash in the company’s account. Cash management requires immediate, constant, and responsive decision making. Efficient cash management process is to manage the intense economic world of competition and instability. Organization manages capital, business risk, monitor cost, and inventory; which are cash management techniques to assist financial managers in success of the organization. For instance, working capital management involves the financing and management of the current assets of the company. The financial executives devote more time to working capital management than to any other activity (Block & Hirt, 2005). Financial managers must be knowledgeable in techniques to execute effective ways to manage cash, and efficient ways to obtain cash. Techniques that can be used to have effective cash management are short- term investments, float, and international cash management. For example, float refers to the difference between the balance carried on the corporate books and the amount credited to the corporation by its bank (Block & Hirt, 2005). Other cash management techniques consist of nature of the asset growth, controlling assets, patterns of financing, financing decision, and a decision step and shift in asset structure. Since there is an opportunity cost of obtaining excess cash, companies will leverage the minimal amount of cash that can cover payables. To achieve that, the float technique is used and payable/ receivables are recorded into corporate books. In short- term financing, the strategies are focused in investing cash. In an organization, cash is kept for transaction, payments, emergencies, and opportunity cost