Tips on Effective Cash Management

There’s more than meets the eye when it comes to handling your cash! From processing transactions to depositing money into the bank, there are several steps along the way. It is essential for retail businesses to maintain effective cash handling processes to protect their cash and maximize profitability. 

Here are some levels of effective cash management.

1. Stay Organized

Any business owner understands how important it is to maintain specific records. It should be no different when it comes to tracking money as it makes its way through your business. To prevent losses that emerge from being disorganized, stay on top of your cash processing, and maintain up-to-date records of events, cash totals, and deposits.

2. Stay on Top of Your Cash

As stated, managing your cash involves monitoring many moving parts. Establishing effective policies and procedures in your business and guaranteeing that they are followed will enable you to stay on top of your investments so you can avoid experiencing from preventable losses.

3. Look for Opportunities to Improve

Once you have made modifications to streamline your cash administration process and improved your policies and procedures, it is crucial to consistently re-evaluable them to guarantee that your business is operating as efficiently and precisely as possible.

4. Uphold Policies and Procedures

Guaranteeing that your staff is following your systems and procedures is vital to maintaining the effectiveness of how your business handles cash. Presenting your staff with proper training and enforcing staff adherence to your policies will assist make sure that your cash administration process proceeds without any hiccups.

5. Watch How Much Cash You Keep on Hand

When the business becomes busy, it’s comfortable for tasks like creating deposits to fall by the wayside. Keeping too much cash on hand is an appeal for potential thieves, both internal and external. Set deadlines on how much money you can stay on-site at any one time to protect your cash.

6. Encourage Employee Accountability

As mentioned, having adequately trained staff goes a long way to maintaining good cash management methods. Trained staff members are more likely to follow orders and procedures as well as be accountable to the work that they finished. Enforce your plans and establish consequences for when systems are not developed to encourage employee accountability.

What is Treasury Management?

The process of managing to the financial assets and holdings of a business. Most treasury management departments aim to optimize their company's liquidity, make sound financial investments for the future with any excess cash, and decrease or enter into hedges against its economic risks. It also means that ‘the corporate administration of all financial matters, the generation of external and internal funds for business, the administration of currencies and cash flows and the complex strategies, policies, and procedures of corporate finance.’

The critical goal of treasury management is planning, organizing and managing cash assets to satisfy the financial purposes of the organization. The aim may be to maximize the return on the possible cash, or minimize interest cost or mobilize as much cash as feasible for corporate investments. Dealing in forex, money and stock markets involves complex risks of varying exchange rates, interest rates and prices which can influence the profitability of the organization. Treasury administrators try to reduce losses by adopting risk transfer and hedging systems that suit the internal policies of the organization. Options, futures, and swap are a few of the significant derivative instruments, and the Treasury Managers use to hedge their opportunities.

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Role and Functions of Treasurer

The Treasurer will manage the cordial relationship with the banks and include in working capital and money administration. The Treasurer will guarantee that the business has the liquid funds it requires and invests surplus funds. The Treasurer should have a thorough knowledge of funding demands of the organization, sources of finance available and the value of those sources and the risk associated with it.

The Treasurer would be responsible for executing the business with projections of exchange rate movements, exposure to currency risk and interest rate risk. He should adopt appropriate policies for foreign exchange risk management. He should be ready to advise effectively on systems such as international transfer pricing, international tax policies and its impact on the firm.

Functions of Treasury Management

1. To maintain the liquidity of business: This is the primary function of treasury management. Without proper liquidity, it is risky for companies to operate smoothly. Cash flow review and working capital control are useful in treasury management.

2. Mergers and acquisitions: The department may direct on the company’s acquisition projects and may be called upon to combine the treasury functions of an acquirer.

3. To Implement Quick Finance to Companies: The treasury board has to arrange modern finance for a company when it requires the money. For this, a good system in the financial market is required.

4. To Forecast Cash: Gather all the data from around the company to create an ongoing cash estimate. This data may come from the accounting records, the budget, capital budget, and even the CEO.

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What Does Cash Management Mean?

Cash management refers to a wide area of finance including the collection, administration, and usage of cash. It comprises assessing market liquidity, cash flow, and investments. In banking, cash management, or treasury control, is a marketing term for several services compared to cash flow offered principally to larger business consumers. It may be employed to describe all bank accounts presented to businesses of a particular size, but it is more regularly used to illustrate specific services such as cash concentration, zero balance accounting, and clearinghouse facilities. Sometimes, private banking clients are given cash management duties.

What Does Cash Management Mean?

In the real world, businesses have strict cash management authorities to monitor their inflows and outflows while maintaining a sufficient amount to take advantage of attractive investments or control unforeseen liabilities — efficient administration of cash limits loss of money due to theft or error in processing transactions. Numerous best methods are adopted to improve the management of the company’s funds. This includes shortening of cash collection periods; regular follow-ups for collections, negotiation of beneficial terms with suppliers enabling a delay in payment periods, and preparation of cash flow projections. Businesses also use technology to speed up the cash accumulation process. They must do all of this while maintaining an adequate amount of funds to meet daily services.

Cash Management

Accounts Receivable Management

Accounts receivable management includes is all about guaranteeing that clients pay their invoices. Good receivables management benefits prevent overdue payment or non-payment. It is, therefore, a swift and effective way to strengthen the company’s commercial or liquidity position. 

The importance of receivables management

Every corporation wants to purchase low and sell high. But they can lose everything with bad receivables management during the last stage of the sales method. Over half of all bankruptcies can be attached to poor receivables management, which shows its importance. Receivables management includes much more than reminding consumers to pay. It is also about recognizing the reason for non-payment. Perhaps a product or service was not delivered? Or there was an administrative failure in the invoice? Good receivables administration is a complete process consisting of:

● Managing the customer’s credit rating in advance.
● Constantly scanning and monitoring consumers for credit risks.
● Maintaining customer relationships.
● Detecting late mortgages in due time.
● Detecting criticisms in due time.
● Decreasing the total balance outstanding (DSO).
● Preventing any lousy debt in receivables excellent.