Cash Management Need And Importance Of Cash Management (a Brief Note)

Every business tends to focus on both short term stability and long term survival and growth and strives to maintain accordingly. If cash is managed efficiently, the company stays healthy and flexible and remains solvent. In this way, providing funds to the business as and when needed is the key to success of a business.  In contrast to this, if adequate cash is not available, the situation can lead to bankruptcy - Hence the need of cash management.

Not necessarily yet commonly, having been presented as the first item in one of the main Financial Statements, Balance Sheet, cash is regarded

to be the king as it is the most liquid asset of a company. As such, management of cash is of a great value and significance to a business.

Providing sufficient funds to a business and protecting it against the possibility of insolvency is the basic requirement of working capital management that entails cash and liquidity. In fact, there can be many a reason when a business needs to be in the money always while managing it properly.  A company needs to make repayment of Loans. It has to pay taxes or it is that it needs to purchase inventory or raw materials. Moreover, holding the cash entails a precautionary measure in order to meet unforeseen events. Therefore, the cash must be managed properly and be provided for arising contingencies.

Cash management


necessitates speeding cash inflows while slowing down cash outflows, but it may not be considered in isolation. No sooner do the payments come due from customers or clients than they must be collected, while constant follow ups must be maintained. It would thus lead to the maximization of collectability. Similarly, the payments must be made as close to the cut-off-date as possible, yet being benefited with the discount facility if it is available. Precisely, cash management enables to process cash receipts and payments efficiently. If done in an efficient way, cash management leads a business towards the desired level of success while enabling it to maintain both short term stability and long term survival and growth with sound Financial health and flexibility.

Written By:

K.A.Fareed (Fareed Siddiqui)
Writer, Trainer, Author, Vb/Vba Developer
BBA; MBA-Finance; M.Phil-Financial Management; (PhD-Management)
MA-English; M.Phil-English
Pursuing CMA-USA
Individual Member of Institute of Management Consultant of India

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Article Written By FAREED SIDDIQUI

I am an Individual Member of Institute of Management Consultants of India. I am a Professional with a high creative capability based on Business, Management, Financial Accounting, Management Accounting, Finance and Management Consulting Field. I impart part time training and development programs. I write professional articles on business & management, business English and Software Engineering.

Last updated on 27-07-2016 121 0

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