Running head: CASH MANAGEMENT
Analyzing Financial Statements
University of Phoenix
There are dozens of cash management techniques in use today. Some have been used for centuries; some are used by companies of different industries that work for one but not the other. The two that will be discussed here are the basic cash management, international cash management, and inventory management. Then we will discuss different short term financing methods.
“What is cash management? The first step in the standard cash management process, which was originally developed for manufacturing companies, is redesigning a company’s bank account structure. Years ago, a typical company had many bank accounts, usually scattered around various banks. With the advent of professional cash management, the operative word became “consolidate.” Funds were merged into a limited number of bank accounts to allow more control over monies. Effective cash management is absolutely dependent on knowledge of the status of cash balances and near-term cash flows at all times. Daily bank reports are an important part of this control process, and it is necessary to keep these concise and useful (Bruning and Lucy 1993).”
“Managing cash is becoming ever more sophisticated in the global and electronic age of the new century as financial managers try to squeeze the last dollar of profit out of their cash management strategies (Block and Hirt 2005).” The cash budget is the main tool used to manage the companies’ money.
“Cash balances are largely determined by cash flowing through the company on a daily, weekly, and monthly basis as determined by the cash flow cycle (Block and Hirt 2005).” Inventory management can be used along the same lines as cash management. Both are tools used to budget and find out were money can be utilized to the fullest. The difference is not quite as obvious as it seems as discussed in the next paragraph (Block and Hirt 2005).”...