Running head: FINANCIAL MANAGEMENT
Financial Management: Cash Management Comparative Analysis
Beverly V. Armour-Thomas
University of Phoenix
February 10, 2008
Introduction
Cash management can have several definitions such as 1) the efficient management of cash in a business in order to put the cash to work more quickly and to keep the cash in applications that produce income. Or 2) accounting for the cash outlays and the recovery of cash or 3) a strategy by which a company administers and invests its cash and finally 4) the control of cash collections. Regardless of the definition, managing cash in a small, medium or large business is an important function for financial managers. Recall your parents referring to a "rainy day fund" or emergency fund? Cash management for corporations has similar characteristics. According to Block and Hirt (2005) A business may have need to use cash to pay for corporate expenses such as supplies, payrolls and taxes and can be used to alleviate long-term debt or fixed assets. In this paper, a review of several cash management techniques will be examined.
Cash Management Techniques
There e are a number of techniques that would assist a business in managing its cash flow. Financial managers will examine the three inputs that form the basis of cash flow: sales, receivables and inventory to determine the best cash management technique. In the following paragraphs, a comparison of various techniques will help to understand the complexities of cash management.
Collecting receivables is a technique that requires aggressive collection of overdue accounts. It reduces the time between delivering the product or service to the customer to assuring payment is received by the c ...