Cash Management

Cash Management

Cash management means optimal cash maintain in a business. If an excess is taken in a business, it is harmful because it does not grow profit. Contrary if the cash is taken deficit position them the liquidity crises exists. So excess cash or deficit cash are both harmful for a business in this regard cash management is very necessary. It is a key component of a company’s financial stability and solvency. The goal is to manage the cash balances of an enterprise in such a way as to maximize the accessibility of cash not invested in fixed assets or inventories and to do so in such a way as to evade the hazard of liquidation. It covers a broad area of finance. It includes assessing cash flow and market liquidity.

According to I.M Pandy, “Cash management is concerned with the meaning of –

  1. Cash flows into and out of the firm.
  2. Cash flows within the firm.
  3. Cash balance held by the firm at a point of time by financing deficit or investing surplus cash.

Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. Wisely managing cash enables a company to meet unexpected expenses, and to handle regularly occurring events such as payroll.  Efficient management of cash prevents loss of money due to theft or error in processing transactions.