Why is a Cash Budget so vital to a company?
A Cash Budget is so vital to a company because it manages the company's finances in a manner where it is easy to determine their incoming and outgoing flow of cash within a given period of time. Finances of a company is better maintained through a cash budget.
What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash? The five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash are the following: Reduce receivables or average collection period - matter of reducing the time in which a company receives the money in which they are owed. Increase payables or average payment period - high credit periods provides more gain for the company. Manage inventory levels - not too much is spent on unnecessary inventory but also maintain enough to be able to provide customers with the product. Plan major/capital expenditures - it is in the best interest of a company to maintain enough so they are not struggling financially and they have enough to work with. Invest idle cash - company is able to capitalize money in which they are not using by considering profitable investments.