The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
Many organizations have maximized the use of cash on hand by effective cash management techniques and the use of short-term financing. This paper will discuss various cash management techniques and short-term financing methods used by organizations.
Cash Management Techniques
There are many techniques used to manage cash including, the nature of asset growth, controlling assets, patterns of financing, the financing decision, a decision process and shifts in asset structure. For any company the growth of asset results in a growth in wealth if managed effectively. The typical firm usually forecast the rate of sales to ensure that the production of goods match sales so there is not an overflow if inventory. As a company expands and produces more items they will acquire permanent current assets. Permanent current assets can be described as a constant inventory of items because it is almost impossible to predict the market and the demands of the consumer.
In order to facilitate the growth of assets a firm must control its assets by matching production and sales. To manage sales and productions, organizations “employ level production methods to smooth production schedules and use manpower and equipment efficiently at a lower cost” (Block & Hirt, 2005, Chapter 6, p 3).
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