Cash availability is the most obvious benefit of cash management, but it’s also probably the most important benefit. There are many difficult business decisions you face during a given week, but a sudden, unexpected lack of cash can take a decision completely out of your hands. In contrast, if your financial decisions are routinely influenced by cash management principles, you’re more likely to possess the cash necessary for business growth – or for an unexpected investment opportunity. Additional benefits may include:
• Drought mitigation: Dry spells occur in all fields of business, and you can’t, of course, predict the exact nature or timing of such spells. However, if you’re carefully monitoring your cash inflow and outflow, and if you’re willing to examine each pending fiscal year with a critical eye and construct a cash flow budget, you’re less likely to find your business without cash when it needs it most.
• Cash productivity: If you’re not actively managing the cash of your business you’re potentially losing money. Effective cash management results in the availability of more money for longer periods of time. Consequently, you have more money upon which you can draw interest, and you can draw that interest for a greater duration.
• Increased efficiency: If you don’t actively manage your cash, you may often find that it manages your business. Without a cash flow budget, for example, you may frequently find that you and your employees are forced to focus upon cash availability issues rather than productivity. An effective cash management plan allows you to focus more time upon the business of making money rather than the worries of averting financial disaster.
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