What is Cash Management?

Cash management is the method of receiving and handling cash flows.

It is the control and utilization of total revenue in the best possible manner.

Cash flow management reflects the financial security and stability of the company.

The same applies to a person where cash reflects the financial stability of the individual also acknowledged as a portion of the total wealth portfolio.

Both the businesses and individual persons have various offers accessible in the commercial marketplace to help them with their cash management requirements.

Related - How to manage cash flow in Small Business

Despite banks being acting as the primary provider for the custody of cash assets, there exist several cash management solutions providers for both personal and companies who are seeking to get the best results & profit on cash assets or the best use of their cash.

The question What is Cash Management can also be understood as the most advantageous use of available cash without any additional funds required by the company.

Most of the businesses are started with a certain amount of money in hand. That investment money is used to start and grow a particular business.

Gradually when the business grows and revenue starts then comes the role of cash management.

Why Cash Management?

Cash is the most important asset for a business or for a person to pay their necessities regularly.

Majorly companies have an abundance of cash in and outflows which must be efficient to complete all payment commitments, strategy for future payments, and keeping required business stability.

For individuals, it's a responsibility to not only maintain the cash amount but also earn idle cash on top of it.

A wide range of offers is available in the financial marketplace to deal with all types of cash management needs.

Banks are the chief financial service provider but there are many other cash management solutions for individuals and companies as well.

Inside corporate companies, business managers and chief financial officers take care of overall cash management, stability, and other related responsibilities.

Some companies also seek different service providers to outsource their overall or partial responsibilities of cash flow management to companies like Clear Cycle

Various important metrics are being observed and examined by these cash management executives on a specific time interval.

How much cash should one keep in hand?

Keeping large or small amounts of cash has its own advantages & disadvantages.

Assume a supplier of raw material presents you with an offer to buy at a 10% discount lasting today or for a very short period of time.

At this time if you have the money, you will be able to avail of the discount and buy the material with instant payment or by payment management software But if you don’t the offer will just pass away.

What if you are keeping a big amount and no such offer comes up?

In that case, you are paying interest just to keep the funds in a box. And if it is your own money, you are losing a big interest because it is not in the market, you are keeping the cash in hand and hence it won’t grow.

The Cash Flow Statement

Cash flow statements are maintained on a daily basis and are quarterly reported to stakeholders.

It records the whole cash flow of the business, total cash received, cash paid, investments, etc. on a daily basis it records how much cash is available with the company.

A cash flow statement can be divided into three parts: operating, investing, and financing. The sum of these three parts is the total cash flow.

Cash activities in the operation part vary strongly as per the net-working amount reported on the cash flow statement as a business's current assets removing their present liabilities.

The rest two left sections of cash flow statements are extra straight forward with the in and outflows of the cash depending & concerning investing and financing.

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Conclusion -

I hope this blog has answered your question of What is Cash Management. Please share your opinion & views of cash management topic in comments.