Cash management is a very important part of the business management system which manages the financial activities of the company such as collection, investment and cash flow statement.
The main aim of cash management is to maintain the optimum investment of cash for the most profits.
Cash flow statement has a key role in the business that explains cash inflows (money going into the business through selling, investing or financing) and outflow(opposite of the cash inflows) in three steps investing, financing and operating activities.
This gives the cash information and extremely takes care of the financial health of the company.
The operating cash flow statement generates data such as sales, received amount. Investment cash flow statement provides the investing information like long-term and short-term investing information, whereas financing cash flow gives financing information, including the received amount of stocked products or repurchase amount information.
Impacts of poor management
Poor cash management can lead to destroying the entire business. It affects companies employees and the whole operation of the business process.
There are some key points listed below which describes how poor cash management affects the business operations.
Poor cashflow -
If cash flow shows negative impacts which may cause responsibility for falls down the business.
Low profits: Both the term cash flow and profit are in high preference in business management. If a business is not getting the benefit and can decline on cash flow, then it may be hard to manage all liabilities.
Late or partial payment: This can shorten the business if you have done all the work and still not getting amounts or even if you offer your customer for instalment especially for large payment charges, it’s not also great for your cash flow.
Delayed payment posting: Most of the Online payment platforms delay credits to the account; it sometimes takes time to debts money; it should not be avoided because it leads to having poor cash flow.
Over investing: By investing too much money to expect large profits can lose the business process
Inventory control
Inventory control measures how a business is running. It improves business cash flow in another way it also has a negative side;
Reduced sales:
Most of the companies avoid managing inventory control which becomes one major impact of poor cash management. At this time period, if the company could not be able to provide the products which they are looking for, the customers would like to start to prefer other companies where they can purchase the products according to their requirements which may be responsible for losing their sale.
There are a lot of chances that the customers could provide negative feedback which may lead to the loss of the company's reputation.
Dissatisfied customer
This is one of the crucial influences of business management due to poor cash management. The company suffers the said situation if the customer attempts to place an order which is a fast-selling item and they find out that the product is out of stock. In that case, the company fails in its service.
This makes customers exhausted to your company, and they may go forward to another company’s offer, this may decrease the company’s sales.
Obsolete stocks
This is the process of increasing stocks; this happens when the company could not be able to deliver. These stocked products have fewer chances of getting in the selling process in future demand.
As the business grows when it comes to the highest level of progress, it becomes complex and difficult to control the overall system; also, it has a chance of getting lost and becoming a poor business.
To keep growing your business, you have to improve your business management skills as well as you have to know your customers what kind of service they expect from you. Maintain the business operations such as cash flow statement and inventory cost, follow a business management software.
Select a manager who can properly communicate with employees and customers.