CASH MANAGEMENT

INTRODUCTION

Introduction to Cash Management

Management of cash is one of the most important areas of overall working capital management

due to the fact that cash is the most liquid type of current assets. As such it is the responsibility

of the finance function to see that the various functional areas of the business have sufficient

cash whenever they require the same.

At the same time, it has also to be ensured that the funds are not blocked in the form of idle cash,

as the cash remaining idle also involves cost in the form of interest cost and opportunity cost. As

such the management of cash has to find a mean between these two extremes of shortage of cash

as well as idle cash.

Cash Management is the process of identifying the financial strengths and weaknesses of the

firm by properly establishing relationships between the items of the balance sheet, profit and loss

account, statement of cash flow, cash balance , business segment and liquidity position of the

bank. Cash Management is basic input needed to keep the business running on a continuous

basis. They are structured financial representation of the financial position and performance of

enterprise.

A set of general purpose cash flow statements provide information about operating activities and

Investing and Financing Activities to various users of accounts are maintaining in daily, weekly,

monthly and yearly basis. The accounts are maintained and statements depending on the size of
the firm. It is undertaken by the management of the firm, or by parties outside the firm, viz.

owners, creditors, investors and others.

Cash is the important current asset for the operations of the business. Cash is the basic input

needed to keep the business running on a continuous basis; it is also the ultimate output

expected to be realized by selling the service or product manufactured by the firm. The firm

should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s

manufacturing operations while excessive cash will simply remain idle, without contributing

anything towards the firm’s profitability. Thus, a major function of the financial manager is to

maintain a sound cash position.

Cash is the money which as firm can disburse immediately without any restrictions. The term

cash includes coins, currency and cheques held by the firm, and balances in its bank accounts.

Sometimes near — cash items such as marketable securities or bank of near — cash assets is that

they can readily be converted into cash, generally, when a firm has excess cash, it invests it in

marketable securities. This kind of investment contributes some profit to the firm.

For some persons’ opinion, cash means only money in the form of currency, the other person’s

view cash means both cash in hand and cash at bank. Some even include near cash assets in it.

They take marketable securities too as part of cash. These are securities which can easily be

converted in to cash. These viewpoints reflect the decree of freedom of the persons using the

cash. Wherever, a person wants to use it immediately can wait for some time and it depends

upon the needs of the cash.

Cash Management is concerned with the managing of: (i) cash flow in and out of the firm, (ii)

cash flow within the firm and (iii) cash balances held by the firm at the a point of time by

financing deficit or investing surplus cash. The surplus cash has to be invested while deficit has

to be borrowed. Cash management seeks to accomplish this cycle at a minimum cost. At the

same time, it also seeks to achieve liquidity and control. Cash management assumes more

importance other than current assets because cash is the most significant and the least productive

asset the firm holds.

It is significant because it is used to pay the firm obligations. However, cash is unproductive.

Unlike fixed assets or inventories, it does not produce goods for sale. Therefore, the aim of cash

management is to maintain adequate control over cash position to keep the firm sufficiently

liquid and to use excess cash in some profitable way.

Cash management is also important and it is difficult to predict the cash flows accurately,

particularly the inflows, and there is no perfect coincidence between the inflows and outflows of

cash. During some periods, cash outflow will exceed cash inflow because payments for taxes,

dividends, or seasonal inventory buildup. At other times, cash inflow will be more than cash

payments because there may be large cash sales and debtors may be realized in large sums

promptly. Further, cash management is significant because cash constitutes the smallest portion

of the total current assets, yet management’s considerable time is devoted in managing it. In

recent past, a number of innovations have been done in cash management techniques. An

obvious aim of the firm these days is to manage its cash affairs in such a way as to keep cash
balance at a minimum level and to invest the surplus cash in profitable investments

opportunities.

In order to resolve the uncertainty about cash flow prediction and lack of synchronizations

between cash receipts and payments, the firm should develop appropriate strategies for cash

management. The firm should evolve strategies regarding the following four facts of cash

management.

• Cash Planning: Cash inflow and outflow should be planned so that the cash should be

surplus or deficit for each period of the planning period. Cash budget should be

prepared for this purpose.

• Managing the Cash Flow: The flow of cash should be properly managed. The cash

inflows should be accelerated while, as far as possible, the cash outflow should be

decelerated.

• Optimum Cash Level: The firm should decide about the appropriate level of cash

balances. The cost of excess cash and danger of cash deficiency should be matched to

determine the optimum level of cash balances.

• Investing Surplus Cash: The surplus cash balances should be properly invested to

earn profits. The firm should decide about the division of such cash balance between

alternative short and long term investment opportunities such as bank deposits,

marketable securities, or inter-corporate lending.

The ideal cash management system will depend on the firm’s products, organization structure,

competition, culture and options available. The task is complex and decisions taken can affect
important areas of the firm. For example, to improve collections if the credit period is reduced, it

may affect sales. However, in certain cases, even without fundamental changes, it is possible to

significantly reduce the cost of cash management system by choosing the right bank and

controlling the collections properly.

Cash Flow Analysis

Cash plays a very important role in the entire economic life of the business. This movement of

cash is vital important to the management.

A firm needs to make payments to its suppliers, to incur day to day expenses and to pay salaries,

wages, interest and dividend etc. In fact, what blood is to a human body for smooth function of

organs and just similar cash plays an important role to business enterprises for smooth function

of each and every activity. It is very essential for a business to maintain adequate balance of

cash.

Team Life Care Company (INDIA) Pvt. Limited was established in year 2002 to provide

services to the all areas in all over India, has been successfully running company of all these

years. Team Life Care Company (INDIA) Private Limited is one such organization which is

taking due cares for its financial activities like cash management and liquidity management.

With regards selected this organization for the study. I prefer myself to work with a leading

private sector enterprise, which has been growing potentially; Team Life Care Company

(INDIA) Pvt. Limited, Visakhapatnam is continuously profit making organization operating

under private sector.

Cash is the important current asset for the operations of the business. Cash is nothing but

money, which as firm can disburse immediately without any restrictions. The term cash includes

coins, currency and cheques held by the firm, and balances in its bank accounts. More

specifically in promoting of an economy-banking sector has been provided a crucial role by

providing financial assistance to various sections of the economy. There are certain insurance

companies along with public sector as well as private sector are operating in India. Each one has

its own different structure in management and its operations.

SCOPE OF THE STUDY

The scope of the study on cash management at Team Life Care Company in Visakhapatnam

encompasses a comprehensive examination of the company’s practices, processes, and strategies

related to the management of its cash resources. This includes analyzing the procedures for cash

inflows and outflows to assess their efficiency and effectiveness. Additionally, the study will

evaluate the company’s liquidity management practices, focusing on how it ensures adequate

cash reserves to meet short-term obligations while minimizing idle cash. Furthermore, the

analysis will delve into Team Life Care’s investment strategies to optimize cash reserves,

balancing liquidity needs with the pursuit of optimal returns. The study will also identify

potential risks associated with cash management, such as liquidity risk and market risk, and

propose strategies to mitigate these risks effectively. Moreover, it will assess the technology and

systems utilized by the company for cash management purposes, including cash forecasting,

reconciliation, and monitoring tools. By benchmarking Team Life Care’s cash management
practices against industry standards and best practices, the study aims to provide actionable

recommendations for enhancing efficiency, mitigating risks, and maximizing shareholder value.

OBJECTIVES OF THE STUDY

The following are main objectives of the study.

➢ To review the profile of Team Life Care Company (INDIA) Pvt. Limited, Visakhapatnam as
its importance.

➢ To understand the scenario of cash management in Insurance Companies.

➢ To standardize short term cash forecasting and long term cash forecasting for
comparisons in Team Life Care Company (INDIA) Pvt. Limited

➢ To compare liquidity performance with past performance

➢ To offer suggestions for improvement of the cash flows and financial position of Team
Life Care Company (INDIA) Pvt. Limited.
 METHODOLOGY OF THE STUFY

The Project is based both primary and secondary data sources.

Primary data:

Primary data was collected by interaction with Branch manager and employees at different
levels.

Secondary data:

Secondary data is collected for Annual reports published by Team Life Care Company (INDIA)

Pvt. Limited from 2018-2023 various books, magazines, journals and web resources.

Data Collected from various sources

Balance sheets

Profit and loss

Cash Reports and cash flow statements of Team Life Care Company (INDIA) Pvt. Limited.
LIMITATIONS OF THE STUDY:

1) Since the principal method of study is the case study method, it has all the l limitations

associated with the method.

2) The study is confined to the particular organization it has no universal application.

3) Employees are busy with their job demands and rigorous work schedule, hence it is very

difficult to collect data.

4) Time is very limited to complete the project work.

5) Considerable employees are not come forward to received the information due to fear.

Data Interpretation and Analysis

After collecting the data will be analysis and interpretation with the help of a suitable

statement method. The necessary findings, Summary & Conclusion also included with the last

chapter of the dissertation.

Presentation of the Study:

1. The first chapter deals with the Introduction, Need for the study, Objective of the
study, Methodology of the study, Limitations of the study and Presentation of the
study of Team Life Care Company (INDIA) Private Limited.,

2. The second chapter deals with the profile of Team Life Care Company (INDIA)
Private Limited
3. The third chapter deals with the Theoretical framework of the working capital
management.

4. The fourth chapter deals with the data analysis of Team Life Care Company
(INDIA) Private Limited.,
5. The fifth chapter deals with the findings, suggestions, conclusions and
bibliography.