Scribd
Upload
73 views2 pages

Summary Cash Flow Management

Cash flow management is important for forecasting future funds and meeting financial obligations. Insufficient cash can force a business to close, with 82% of businesses failing due to cash shortages. Effective cash management reduces stress and risk through strategies like prompt billing, payment reminders, discounts for early payment, and emergency funds. Various financing and collection methods can help ensure timely payments.

Uploaded by

rishi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
73 views2 pages

Summary Cash Flow Management

Cash flow management is important for forecasting future funds and meeting financial obligations. Insufficient cash can force a business to close, with 82% of businesses failing due to cash shortages. Effective cash management reduces stress and risk through strategies like prompt billing, payment reminders, discounts for early payment, and emergency funds. Various financing and collection methods can help ensure timely payments.

Uploaded by

rishi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

The act of tracking what proportion of money comes in and out of your firm is thought of as

income management. This enables you to forecast what proportion of money your company
will have in the future. It also assists you in determining what quantity of money your
company requires to settle debts like paying staff and suppliers. (Cash Flow Definition,
2021).
Cash shortages might indicate a controversy in your company. Cash is the lifeblood of an
organization and running out of it prevents you from meeting your financial responsibilities.
If you fail to meet your financial responsibilities, your company is also forced to shut its
doors. A cash shortage could be one of the reasons why 82 percent of businesses fail.
Being cash strapped is a stressful and unpleasant situation to be in. Effective cash
management has several advantages, including less stress, assurance that you will be able to
meet your financial responsibilities, and knowledge of when client payments will arrive in
your bank account. Having a cash management strategy in place reduces the risk to your
company.

There are various ways to pursue financing as well as collections, such as:
1. Payment at the point of sale- Clients must pay at the point of sale before dealing with
them. This is the most effective technique to secure prompt payment.
2. Invoicing on time- If payment at the time of sale is not possible, the best choice is to
invoice on the day the contract is signed. This means that your invoicing terms have
begun immediately, and that payment will not be delayed.
3. Reminders of late payments are sent out on a regular basis- Ensure timely follow-up
with clients who have fallen behind on their payments.
4. Provide discounts to customers who pay quickly- Offer a little discount to customers
who pay in advance, incentivizing them to do so.
5. Cash reserve in case of emergency- Save some money for an emergency fund, which
you should set aside in case of cash constraints. (Houston, 2020)


Reference-

Cash Flow Definition. (2021, May 31). Investopedia. Retrieved November 25, 2021, from

https://www.investopedia.com/terms/c/cashflow.asp

Houston, M. (2020, August 27). The Importance of Managing Cash Flow In Your Business.

Forbes. Retrieved November 25, 2021, from

https://www.forbes.com/sites/melissahouston/2020/08/27/the-importance-of-managing-

cash-flow-in-your-business/?sh=1bec97fe26cd

You might also like