Cash flow management can be highly taxed and accounting oriented. Hence, it requires working relationships with tax and accounting staff. It also requires coordination between treasury and operations.
Fremont, CA: Cash flow management is an essential part of every business. It is the mobilization of company funds to produce income and compensation. Cash managers must leverage the non-credit services of banks to achieve efficient cash flow. Some of the non-credit services included are account reconciliation, funds concentration systems via checking accounts, depository accounts, electronic data interchange, investment services, and lockboxes.[vendor_logo_first]
Cash flow management incorporates all the activities that impact the statement of cash flows found in annual reports. The five primary areas of cash flow management are:
Collection - cash from sales funneled into the company's account, used for business operations and growth.
Disbursements - funds from company accounts transferred to accounts of various creditors, including employees.
Bank relations - evaluating and comparing bank services and negotiating fees.
Cash forecasting - prediction of cash flows based on historical data and current marketplace information.
Borrowing and investing - liquidity for current and future needs maintained sufficiently.
Cash flow management can be highly taxed and accounting oriented. Hence, it requires working relationships with tax and accounting staff. It also requires coordination between treasury and operations. In today's volatile markets, it requires powerful electronic tools to gather diverse financial information and format it into useful reports for decision making.
Here are some of the key business risks associated with the cash flow process.
Sensitivity
The over-commitment of resources and expected cash flows can threaten the organization's capacity to withstand changes in the environmental forces beyond its control.
Financial markets
Movements in prices, rates, and indices affect the value of the organization's financial assets and stock price, which may also affect the cost of capital and its ability to raise money.
Employee/third-party fraud
Fraudulent activities initiated by employees, customers, suppliers, agents, brokers or third-party administrators against the organization for personal benefits can expose the organization to huge losses.
Interest rates
Significant movements in interest rates expose the organization to higher borrowing costs, lower investment yields, or decreased asset values.
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