CASH

MANAGEMENT

Reported by:
Josephine P. Jimenez
Cash Management
 What is Cash
Management?
– Cash management is the efficient
collection, disbursement, and
investment of cash in an organization
while maintaining the company’s
liquidity.
 Cash Management

– The goal is to manage the cash balances

of an enterprise in such a way as to
maximize the availability of cash not
invested in fixed assets or inventories
and to do so in such a way as to avoid
the risk of insolvency.
Motives for Holding Cash
 Motives for Holding Cash

1. Transaction motive refers to the cash

required by a firm to meet the day to day
needs of its business operations.
Example:
• Salaries & wages
• Interests
• Dividends
 Motives for Holding Cash

2. Precautionary Motive refers to the

tendency of a firm to hold cash, to meet the
contingencies or unforeseen circumstances
arising in the course of business.
Example:
• Increase in the price of raw materials
• Labor strike
• Change in demand
 Motives for Holding Cash

3. Speculative motive the firms hold cash for

the speculative purposes to avail the benefit
of bargain purchases that may arise in the
future.
Example:
• Low interest charged on borrowed funds
• Lower raw material price
• Change in government policies
Cash Flow Management
 What is Cash Flow
Management?
• Cash flow management is the
process of tracking how much
money is coming into and going
out of your business.
 Cash Flow Management

• It is a process of monitoring,
analyzing, and optimizing the net
amount of cash receipts minus
cash expenses. Net cash flow is an
important measure of financial
health for any business.
 Importance of Cash Flow
Management
1.Solvency & Credit worthiness.
Steady cash flows lead to better
credibility and opportunity for foreign
investment. It also leads to ease of
raising fund.
 Importance of Cash Flow
Management
2.Enabling Capex and Investment.
Surplus funds should be invested to
reap future returns.
 Importance of Cash Flow
Management
3.Boosts Vendor and Employee
relations. Smooth flow of receivables
and payables resulting to mutual
trust between the business and the
suppliers, timely payment of salary to
employees.
 Strategies to Maintain a
Stable Cash Flow
• Master your budget
• Learn to spot cash flow trends
• Evaluate your spending categories
• Reduce expenses where possible
• Monitor your pending invoices and
payments
Optimizing Cash Balances

Proper cash forecasting and

optimization enables you to
maximize operational efficiency and
lessen risk.
What does optimizing your
cash entail?
• Establish cash certainty
• Make effective financial decisions
• Enable payments
 Tips for Optimizing Cash
Flow
• Align payment terms for payables
and receivables.
• Plan your cash needs fort he next
quarte, year and several years out.
• Determine your biggest expenses
and look for ways to reduce cost.
 Tips for Optimizing Cash
Flow
• Watch your payroll costs
• Check your occupancy costs
• Evaluate your tax situation and
ensure you have the right structure
in place to optimize after-tax
income.
 Tips for Optimizing Cash
Flow
• Diversify your customer base
• Establish policies for managing
cash
• Network with peers
 THE END.

Thank you very much!

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