CASH FLOW MANAGEMENT

Cash Flow Management

Table of Contents

Introduction3

Literature Review4

Critical Analysis4

Problems in Raising Cash5

Forecasted Annual Cash Flow Statements for Gallant Air Conditioning9

Cash Flow Budget for Small Business9

Importance of Cash Flow Management for the Small Business10

Conclusion13

Cash Flow Management

Introduction

Whether you are running multibillionaire empire or the tiny utility store at the corner of the store, cash is lifeblood of any company. For small business, it is even more important because if there is mismanagement in cash, the company is likely to suffer a serious blow and unlike other companies which are bigger in size, small businesses don't usually have easy access to money and capital markets to cover up the shortcomings in the mismanagement. Cash flow refers to movement of cash in and out of the company. In recent times, it has attracted huge attentions from business mangers. The success of huge companies like DELL and Walmart lies in the effective and efficient management of cash flows. Walmart is definitely a best example which started as a small business, and it moved up to build chain of stores which has presence across multiple countries. The success of Walmart is attributable to effectual cash flow management. Effective cash flow management ensures matching of cash inflow and outflow. Small business, through effective cash flow management, can avoid cash shortages; it can plan well in advance to arrange for cash if there is anticipated need or invest it if there is some idle cash.

Literature Review

Managing cash flow is a problem for almost any company, large or small. The worst symptom of the problem: the company runs out of cash. Small businesses are especially vulnerable to cash flow problems, as they often operate with inadequate cash reserves or no reserves at all, and, worse, tend to ignore the implications of a negative cash flow until it is too afternoon. However, even in larger organizations, the budget for the departmental unit or strategic business unit (SBU) is also often hard - if you exceed your expenditure budget is out of business.

For the purpose of financing, cash flow projections in small businesses are generally the most important aspect of the business plan. Bankers and other external financial intermediaries usually request a cash flow analysis before any other financial statement, because this will show how the loan will be paid. In larger companies, the cash budget for a new project or expansion is critical when making the decision to allocate funds and general progress. In its simplest form, cash flow for small business refers to cash flows, literally, inside and outside the company. Think in terms of real cash, dollar bills, and out of the company, and then identify its sources and uses.

Critical Analysis

Allocation of time and cash flow are inseparable. Payments to suppliers are generally expected even before the company's customers settle their accounts in small business. The daily process of cash management in small business includes various activities, determination of cash based on the current bank account balances (cash position daily), receivables and payables Unpaid (forecast liquidity ) to ...