Cash Flow Management
Cash Management provides meaningful impact on the processes of accumulation of funds and their expenditure reallocation in order to balance the financial and business enterprises.
Characteristic features of cash management practices reflect management principles, ie the basic rules of governing authorities, taking into account the socio-economic conditions prevailing.
Under the management principles form a system of management of cash flows. The structure of the main methods of cash flows include:
• Analysis of cash flows;
• planning and optimization;
• control of cash flow;
• accounting and reporting.
Cash flow analysis - a set of methods for forming and processing of cash flows that enable objective assessment of status, trends, identification of reserves to improve the efficiency of funds and ways to implement them.
Given the period of time, the degree of detail of objects and performance analysis can be promising, current and operational.
In terms of volume analysis can be a theme that is associated with a certain specific purpose, local - related to the activities of individual units, comprehensive - covering all aspects of the enterprise.
The information base for the analysis of cash flows for the periods are forms of financial statements, annexes and other records.
Cash flow analysis and assessment of their impact on the financial condition defined metrics, which include liquidity, solvency, financial stability.
The analysis takes into account when planning and cash flow optimization.
Plan your cash flow - the process of determining their volumes by type of activity, time intervals and directions of use in order to maximize revenues and expenses synchronization and solvency.
The planning process is achieved by optimizing cash flow, ie of the same ratio between incoming and outgoing cash flows between areas and the attraction and use of funds that allows you to achieve the best performance (minimizing costs, maximizing profit).
Control the flow and use of funds is a system of monitoring and verification process flow and use of funds to determine deviations from their set parameters. How does management control objectively necessary. He directs the management of the established ideal model, correcting behavior controlled object.
The essence and importance of control over cash flows is the subject of management checks of planned parameters formation of funds, areas of use, compliance synchronization revenue and expenses in the prescribed period of time, blocking the deviation of a given program, and in case of violations signals the need to adjust the control system.
Thus, control is a means of obtaining information about cash flow through the channel feedback, that the results of its impact on management facility management.
In the cycle of cash management account is the final stage. It provides definitions for different media registration and classification of information on receipts and expenditures for the final data, which reflect the achieved results. Results are reported the account. Thus, the record as a final stage in the cycle management is both an initial stage for the next cycle. Accounting form the information base for the analysis of cash flows for the period.
Effectiveness of cash flow determined timing of receipts and payments, support for permanent solvency and includes the following components:
• determining the minimum amount of cash sufficient to service the ongoing business;
• constant monitoring of cash receipts from sales;
• smoothing fluctuations in revenues and cash payments to avoid payments crisis in certain periods;
• optimization of payments to suppliers and buyers that justify the policy for obtaining commercial loans and deferrals of payments;
• selection areas using temporarily free funds in order to prevent losses from inflation and profits;
• accelerate the turnover of funds through the introduction of organizational and economic measures.
Practical implementation of the components of cash flow management will help to some extent to find a compromise between the need to maintain a certain amount of money to ensure the liquidity of the company and the desire to invest available cash to ensure their return.