IntroductionOne of the most critical functions of a firm's financial manager is that of cash management. Cash is considered the business's lifeblood. Managed well, a company will remain healthy and strong. Managed poorly, the company goes into cardiac arrest. Therefore, the financial manager must be well-versed in the most effective ways to manage the cash a firm has, along with the most efficient ways to obtain cash as needed.
If cash management techniques and short-term financing are not considered important issues, then the business's short-term stability and long-term survival are seriously undermined. There are solutions for better managing a business's cash. This paper will compare and contrast various cash management techniques, as well as the various methods of short-term financing.
Cash Management TechniquesCash flow refers to the movement of cash into and out of a business. (Find Law, 2007).Watching the cash inflows and outflows is one of the most pressing management tasks for any business.
(Find Law, 2007).The outflow of cash includes checks written to each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors. Managing the cash inflows and payments is a function of many variables such as float, use of electronic funds transfer mechanisms, and lockboxes. (Block & Hirt, 2005).
FloatThere are several kinds of delay that create float, therefore cash managers refer to several kinds of float. (Joyce, 2003). There are three sources of float: one, the time that it takes to mail a check; two, the time it takes business to process the check after it has been received; and three, the time that it takes the bank to clear the check and adjust business's account. (Joyce, 2003).
Remote disbursement is another means of controlling disbursements. (Joyce, 2003). There are effective ways of increasing payment float.