Cash Management

Topics: Bank, Money, Finance Pages: 2 (713 words) Published: February 24, 2008
According to Wikipedia ", cash management, or treasury management, is a marketing term for certain services offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking accounts) provided to businesses of a certain size, but it is more often used to describe specific services such as cash concentration, zero balance accounting, and automated clearing house facilities. Sometimes private bank customers are given cash management services." What is Cash management According to Webster's Dictionary, "cash management is the way in which a person or organization manages money." Cash management is a huge responsibility for a financial manager; which is the key to running a successful business. Financial managers must maximize a firm's value, and value is based on cash flow. One of the duties of a financial manager is to determine how much cash should be on hand to run a business adequately. With cash being a nonproductive asset, cash generates no return at all. An example would be a bank a bank makes money off there customers by investing, distributing loans, and other financial services as needed. Just suppose your bank just took the deposit and never moved the money around to make interest off of your money, that bank would not be in business long. When holding money it causes a lower return or no return. Cash management has five components which assist financial managers in making decisions on what to do with what cash. These components are (1) cash flow, (2) using float, (3) accelerating collections, (4) getting available funds to where they are needed, and (5) controlling disbursements. "According to Block-Hirt cash flow relies on the payment pattern of customers, the speed at which suppliers and creditors process checks, and the efficiency of the banking system." Cash flow is that daily activities that allow your company to function adequately. A second component a financial manager should use is the Float method...
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