Today, we are going to discuss some of the Cash flow management functions/areas that businesses need to effectivity manage, mainly.
- Accelerating cash receipts and concentrating reserves
- Planning and delaying disbursements
- Monitoring the cash flow framework
Accelerating Cash Receipts and Concentrating Reserves
Effective cash management involves speeding up the billing and collection process in order to move cash into the organization’s account so it can be used constructively. An organization can decrease the time it takes to have cash available through several methods, including billing quicker, utilizing lockboxes, offering cash discounts, and utilizing electronic funds transfers. Organizations consistently review and analyze their current frameworks to look for areas of progress.
Concentrating cash involves moving cash from one place to another in the time at the lag cost. This implies mobilizing funds inexpensively from banks at various locations throughout the country to a central location or locations. The concentration of cash can be in a single hank or in a number of regional areas.
- Planning and Delaying Disbursements
The objective in planning and delaying disbursements is to pin the most extreme utilization of cash, consistent with an organization’s objectives, and to have cash available when it is required. In their strategy organizations utilize such frameworks as a centralized accounts payable function, remote disbursing, controlled disbursement accounts records, and installments by draft. Unlike collections, in which the credit manager plays a significant role, disbursement is an area wherein the cash manager has complete control over the payment technique, the release date of funds, funding strategy, and other factors.
- Monitoring the Cash Flow Framework
The purpose of monitoring the cash flow framework is to see whether the framework is operating as designed and whether the organization’s goals are being met. Monitoring involves assessing how cash management affects other areas of the company. For example, how does the goal of accelerating cash receipts align with the lenient credit terms offered by the organization’s credit manager? The monitoring process includes managing float and the costs and benefits of using specific banking tools.
There are a great shared CFO services companies that can help your organisation in working capital management, cashflow & inventory management and much more.