Cash Management: Cash Flow Management

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Cash is the lifeblood of an entity whether small, medium or big company, cash is an indispensable asset. As it is said, cash is the most important yet least productive asset that a small business owns. Possession or access to cash is mission-critical for companies, the flow of cash coagulates all the aspects of a business and results in the return expected from the investments. Without cash, a business cannot operate, and without proper cash management, a business might run out of cash to operate with.
Cash management is one of the most critical functions for the success of a company. Cash management refers to the management of an entity’s cash to ensure sufficient cash to sustain the entity’s daily operations, finance
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For a retail business, slow moving inventory is a killer. Cash tied up to inventory is idle cash which can be used to purchase another asset or pay liabilities. Enterprise Resource Planning (ERP) is a software that enables management to monitor its core-business processes by giving real-time information regarding business process and status of business commitments. It uses common databases that is maintained by a database management system. ERP is a helpful tool to monitor market demands and inventory levels that will yield a higher inventory turnover and overall company…show more content…
It is the money needed to sustain operations, which is best decreased, without damaging company performance. Reductions in the working capital will result to increased effectiveness of investments, wherein idle cash is invested in more profitable transactions; improved operating efficiency, and shortened cash conversion cycle.
Failure to manage the inflows and outflows of the company can be lethal. According to a report by the Small Business Administration, 28% of business that declare bankruptcy report that a problematic financial structure is to blame. A neglected or mismanaged cash flow environment will decrease company efficiency. Underperformance of cash flows could post significant threats on the ability of the business to pay its creditors on the established terms of contracts, possibly impairing the company’s credit

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