Mba503 - Cash Management

Topics: Promissory note, Finance, Negotiable instrument Pages: 3 (1091 words) Published: August 13, 2007
Cash Management
Businesses must understand cash management for it to be effective. Financial goals will be harder to achieve without a proven structure. It is possible that goals are not achieved, and it can be seen that cash management may have taken part in it one way or another. It's the fundamental building block of financial planning. There are various methods of short term financing can also be essential to a successful businesses. This paper will describe cash management and short term financing. Some of the points that will be brought up are managing your working capital, managing business risks, and monitoring costs. Working capital is an essential part of cash management. The level of working capital of a business is directly related to the flow of cash into and out of a business. Working capital is needed to setup a business, pay operating costs, and continue to operate until the receivables arrive. Depending on the amount of working capital the business uses, things can be effected like paying suppliers, buying materials and even salaries. I can be seen that maintaining and managing a particular level of working capital allows the business to flex during hard times. Not understanding and forecasting the need for the correct amount of working capital can be devastating to a business. Short-term financing can be used to make business purchases that can allow the company to purchase fixed assets, or help a company with less than expected working capital. A line of credit can be created with the company's financial institution, and is normally done before the need should arise to be effective. There are many risks involved in running a business, and serious challenges should be expected at some time in the future. It is possible to reduce the risk of possible capital issues by planning ahead and having a more diversified client base. Having the business depend on the heath of another business is not good practice. Finding new clients will increase...

References: Benoliel, I. (2002). Money and finance. Retrieved on August 7th, 2007 from
Encyclopedia Britannica (12th ed.). (2005), Phittsburg, PA: Encyclopedia Britannica, Inc.
Investopedia (2nd ed.). (2006), New York, NY: Investopedia, Inc.
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