The Basic Principles of Cash Management are as follows: a. Increase the speed of receivables collections b. Keep inventory levels low c. Delay payment of liabilities. d. Plan the timing of major expenses e. Invest idle cash.
Work Step by Step
a. Money lying with accounts receivables is the money cannot be used by the business. Therefore, it is most essential to increase the speed of collections from accounts receivables. b. The Inventory of raw material and finished goods should be kept at its lowest level. This not only blocks the liquid cash, but also the valuable space in the stores. c.The liabilities should be paid, when due. If bills are paid too early. the company cannot use the cash, available to them. d. The business needs to grow, and for this major expenses are required. The Company must plan the major expenditure, when free cash is available with the company. e. Any cash lying idle earns nothing. This is an important part of the CFO to ensure that minimum cash is remained in cash box. Even if it is for a day / week, the funds should be invested properly.