Cash Flow Management
What Is Cash Flow?
Cash flow is defined as:
“The amount of money entering and leaving your business over a given period of time”
Cash flow management is defined as:
“Monitoring/ management of the money entering and leaving your business over a given period of time”
How To Improve Cash Flow?
Following are some of the ways to manage your cash flows effectively:
- Receive payments from customers on time
- Negotiate a right deal for investments
- Pay off debts timely to avoid debt cycle
- Timely order stock to avoid burden
- Check the market fluctuations while purchasing raw material
- Use marketing tools to make profit
Why Is It Important?
Cash flow management is vital for a firm as:
- It gives a picture of cost vs revenue
- Keeps a check of paying bills whilst making profit
- It balances the timing and amount of cost and revenue
- It helps to forecast potential risks in cash flow
- It helps in drafting future plans for the company
Objective Of Cash Flow Management:
Maximize Value Of Funds
- Invest in long term projects
- Diversify market & customers
- Monitor cost per unit
Minimize Cost Of Funds
- Enhance productivity
- Use cost effective methods
- Invest in technology
Cash Inflow Vs Outflow:
Cash Inflow
- Payment From Customers
- Bank loans
- Interest On Savings/Investments
- Shareholder Investments
Cash Outflow
- Purchase Of Raw Materials
- Salaries Of Employees
- Purchase Of Fixed Assets
- Loan Payments
- Taxes
