CASH MANAGEMENT

PRESENTED BY;
JEANIE RAE SOLIVEN
and JECHELLE CARDONA
CASH

-used as a medium to acquire other assets

-means both cash in hand and cash at bank and even includes marketable securities which can be easily
converted into cash

MANAGEMENT

-is a process of planning , decision making, organizing , leading , motivation and controlling the human
resources , financial, physical and information resources of an organization to reach its goals efficiently
and effectively

CASH MANAGEMENT

-refers to management of cash inflows and cash outflows. It is the process of forecasting, collecting,
disbursing, investing, and planning for the cash, a company needs to operate its business smoothly.

-refers to optimum utilization of cash to ensure liquidity and profitability of business

MOTIVES FOR HOLDING CASH

TRANSACTION MOTIVE – Cash is required in business to meet operational expenses like utility bills,
salary and wages, travelling expenses, repair and maintenance, accounting expenses, taxes, etc.

PRECAUTIONARY MOTIVE- Cash is required as provision to meet unexpected contingencies in shorter

period of time

SPECULATIVE MOTIVE- Cash should also kept to grab profitable opportunities of investments or profit
booking as and when the prices are low or favorable

OBJECTIVES OF CASH MANAGEMENT

OPTIMUM CASH BALANCE

-the tradeoff between opportunity cost or cost of borrowing or holding cash and the transaction cost

A FIRM HAS TO MAINTAIN A MINIMUM AMOUNT OF CASH FOR SETTING THE DUES IN TIME, IF A FIRM
MAINTAIN LESS CASH BALANCE THEN ITS LIQUIDITY POSITION WILL BE WEAK. IF HIGHER CASH BALANCE
IS MAINTAIN THEN AN OPPORTUNITY TO EARN IS LOST .

PROMPT COLLECTION FROM DEBTOR

-Immediate/efficient process of pursuing payments of debts owed by individuals or business

INVESTMENTS OF EXCESS CASH TO EARN PROFITABILITY

INVESTMENTS- An asset or item acquired with the goal of generating income or appreciation

EXCESS CASH TYPICALLY REFERS TO A SURPLUS OF CASH RESULTING FROM COMPANY OPERATIONS OR
THE PROCEEDS OF THE SALE OF A MAJOR ASSET---IN OTHER WORDS ,CASH THAT IS BEING HELD UNTIL IT
IS USED TO PAY DOWN DEBT OR REINVESTED IN A LONG-TERM INVESTMENT

CONTROLLING CASH INFLOW AND OUTFLOW

CASH INFLOW- the money going into a business which could be from sales, investments or financing.

CASH OUTFLOW- it is the money leaving the business

IMPORTANCE:

UNDERSTANDING THE FLOW OF MONEY INTO AND OUT OF YOUR BUSINESS HELPS TO ENSURE YOU
ALWAYS HAVE ENOUGH FUNDS AVAILABLE TO PAY YOUR BILLS. EVEN IF YOU’RE TAKING IN LOTS OF
SALES, YOU CAN STILL FIND YOURSELF CASH-STRAPPED IF THE MONEY FROM THOSE SALES DOESN’T
REACH YOUR BANK ACCOUNT IN TIME TO MEET YOUR MONTHLY OBLIGATIONS.

MEETING PAYMENT SCHEDULE

A schedule defining the dates and amounts of payments to be made for a financial instrument such as a
bond and a derivative.

FUNCTIONS OF CASH MANAGEMENT

RECEIVABLES MANAGEMENT

 Account receivables refer to the outstanding invoices or money which is yet to be paid
by your customers. Until it is paid, such invoices or money is accounted as accounts
receivables. Also known as bills receivables. You need cash all the time to keep your
business running smoothly and ensuring the accounts receivables are paid on time is
essential to manage cash flow efficiently.
 And as the term suggests, management of your accounts receivable is called
receivable management. Basically, the entire process of defining the credit policy,
setting payment terms, sending payment follow ups and timely collection of the due
payments can be defined as receivables management. Management of Receivables is
also known as:
 Payment Collection
 Collection Management
 Accounts Receivables
INVENTORY MANAGEMENT

 Inventory management helps companies identify which and how much stock to order at what
time. It tracks inventory from purchase to the sale of goods. The practice identifies and
responds to trends to ensure there’s always enough stock to fulfill customer orders and
proper warning of a shortage.
 Once sold, inventory becomes revenue. Before it sells, inventory (although reported as an
asset on the balance sheet) ties up cash. Therefore, too much stock costs money and reduces
cash flow.
 One measurement of good inventory management is inventory turnover. An accounting
measurement, inventory turnover reflects how often stock is sold in a period. A business does
not want more stock than sales. Poor inventory turnover can lead to deadstock, or unsold
stock.

PAYABLE MANAGEMENT

 Payables management is the handling of a company’s unpaid debts to third-party vendors for
purchases made on credit. Account payables management involves tasks such as seeking
trade credit lines, acquiring favorable terms of purchase, and managing the timing and flow of
purchase.
 This is all done to efficiently control a company’s working capital.
 The short-term liabilities section of the balance sheet is where the accounts payable should
lie. It mostly consists of the short-term financing of things like accrued expenses, inventory
purchases, and other valuable short-term operations.

SHORT-TERM INVESTMENT

 Short-term investments, also known as marketable securities or temporary investments, are

financial investments that can easily be converted to cash, typically within five years. Many
short-term investments are sold or converted to cash after a period of only three-12 months.
Some common examples of short-term investments include CDs, money market accounts,
high-yield savings accounts, government bonds, and Treasury bills. Usually, these investments
are high-quality and highly liquid assets or investment vehicles.
 Short-term investments may also refer specifically to financial assets—of a similar kind, but
with a few additional requirements—that are owned by a company. Recorded in a separate
account, and listed in the current assets section of the corporate balance sheet, short-term
investments in this context are investments that a company has made that are expected to be
converted into cash within one year.

FORECAST AND PLANNING

 Planning and forecasting is the managerial process of mapping out corporate actions based on
past and present data trends. Planning encompasses everything from high level corporate
plans to strategic plans, to operational, HR, expense, capacity, sales and operational, balance
sheet, profitability, capital, cash flow planning and more. Some may be long term, like
 strategic planning, while others are short term, like operational planning. To create a plan is to
detail KPIs and events that should lead up to reaching a specific objective. Since forecasts are
predictions of future events, plans often use forecasts in order to inform the decision making
process.

TOOLS FOR CASH CONTROL

CASH BUDGET- The cash budget is a budget prepared to estimate the cash inflows and outflows during
a specific period of time in future

CASH OUTFLOWS- The Cash Flow Statement is a financial statement that summarizes the cash inflows
and outflows through three major activities (operating, investing and financing).

RATIO ANALYSIS- Liquidity ratios like current ratio, quick ratio and cash ratio measures the financial
strength of company in term cash and marketable securities available in the company to pay off short
term obligations.

THAT’S THE END OUR PRESENTATION THANK YOU!