Functions of Cash Management
So as to achieve the objectives stated objective, a finance manager has to ensure that investment in cash is efficiently utilized. for that matter, he has to manage cash collections and disbursements efficiently, determine the appropriate working cash balances and invest surplus cash. Efficient cash management function calls for cash planning. Evaluation of benefits and costs of policies, Procedures and practices and synchronization of cash inflows and outflows. It is significant to note that cash management functions, as depicted below. are intimately interrelated and intertwined. Linkage among different cash management functions have led to the adoption of the following methods for efficient cash management :
(1) Use of techniques of cash mobilization to reduce operating requirements of cash;
(2) Major efforts to increase the precision and reliability of cash forecasting;
(3) Maximum effort to define and quantity the liquidity reserve needs of the firm :
(4) Development of explicit alternative sources of liquidity ;
(5) Aggressive search for relatively more productive uses for surplus money assets.
There above approaches involve the following actions which a finance manager has to perform :
(1) to forecast cash inflows and outflows;
(2) to plan cash requirement
(3) to determine the safety level of cash
(4) to monitor safety level of cash
(5) to locate the needed funds;
(6) to regulate cash inflows.
(7) to regulate cash outflows;
(8) to determine criteria for investment of excess cash;
(9) to avail banking facilities and management, a finance manager has to, first of all, plan cash need of the firm.