What Is Cash Management?

Cash management is the process of collecting and managing cash flows. Cash management can be important for both individuals and companies. In business, it is a key component of a company's financial stability. For individuals, cash is also essential for financial stability while also usually considered as part of a total wealth portfolio.

Understanding Cash Management

Cash is the primary asset individuals and companies use to pay their obligations on a regular basis. In business, companies have a multitude of cash inflows and outflows that must be prudently managed in order to meet payment obligations, plan for future payments, and maintain adequate business stability. For individuals, maintaining cash balances while also earning a return on idle cash are usually top concerns.

The Cash Flow Statement

The cash flow statement is broken down into three parts: operating, investing, and financing. The operating portion of cash activities will vary based heavily on net working capital which is reported on the cash flow statement as a company’s current assets minus current liabilities. The other two sections of the cash flow statement are somewhat more straight forward with cash inflows and outflows pertaining to investing and financing.

What Is ACH?

Automated Clearing House (ACH) is an electronic funds-transfer system that facilitates payments in the U.S. The ACH is run by the National Automated Clearing House Association (NACHA). Most debit and credit transactions made through the ACH will clear that same day. Organizations that create these transactions are called ACH Originators. When ACH transactions are made, they are electronic payments that are created when a customer gives an ACH originating institution authorization to debit or credit directly from or to the customer’s checking or savings account. An example would be an employer offering payroll Direct Deposit.

Receivables

Cash, check, debit/credit cards and electronic debits are all viable options. Each customer is different and what might be the easiest payment solution for one will be different for another. Consider offering ACH debits and accepting all brands of debit/credit cards to expand payment options. The easier it is for someone to pay you, the more business they will want to do with you.

Payables

This service is a huge time savings compared to producing, signing, and handing out paper checks. Employees love the convenience of having their payroll deposited directly into their checking/savings account without any effort. This service saves you the cost associated with paper checks and time savings for you producing payroll and employees going to physical branches on payday. For vendors, instead of sending a paper check in the mail, consider paying electronically.

HTH & Accounting Associates help organizations and business owners with accounting and/or financial consulting services.  

For Help with accounting cycle or Bookkeeping contact us at accounting@thaddeus.org or call us at 909-599-2111

Resources:

https://www.investopedia.com/terms/c/cash-management.asp

https://peoplesbankal.com/blog/2019/3-areas-of-review-for-better-management-of-business-cash-flow

https://www.fieldandmain.com/blog/what-is-cash-management-and-how-can-it-benefit-my-business/

Thank you for reading.

The writer of this blog is, Jory Mirtil. He works at Thaddeus as an Accounting Intern. He chose Thaddeus because of the work environment and the mission it stands for. He is someone who aspires to be an Accountant one day. His career path journey will involve a ton of work experience and education in accounting in order to reach his dream to become a CPA.