Cash Management - Process
How the inflow and outflow of cash is linked to the operating cycles of the business? Learn the cash management process in an enterprize and it's key components.
The cash flow timeline includes the total time interval beginning with the first phase of the operating cycle, when resources are purchased, until the last step when receipts are collected.
It consists of 4 basic steps.
1. Material purchases.
Acquisition of raw materials or merchandise for resale includes negotiation of the method of payment, credit terms and trade and payment discounts.
2. Payment for resources.
All resources required to support sales, including labor, marketing and overhead expenses, incur financing costs until cash is collected for sales made.
3. Sale of inventory or services.
Merchandise and other sales are most frequently accomplished by extending credit to customers. The timing of accounts receivable collection is a major focus in cash management.
4. Collection of receipts.
Only when the customer has provided good funds for the merchandise or service does the cash flow cycle conclude for that transaction.
Related Links
You May Also Like
-
What is Account Reconciliation?
Before you understand the Bank Reconciliation Process it is important to understand what is account reconciliation and why it is carried out.
-
Why enterprises need cash management. What is the purpose of having a well defined cash management process?
-
In automated clearing, Bank statement details are automatically matched and reconciled with system transactions. Learn how this process works and what are the perquisites to enable the same.
-
Treasury has increasingly become a strategic business partner across all areas of the business, adding value to the operating divisions of the company. Managing activities that were traditionally carried out within the general finance function. Learn about the drivers for this change.
-
Learning objectives for this lesson are: Meaning of Order to Cash Process; Sub Processes under Order to Cash; Process Flow for Order to Cash; Key Roles & Transactions; Key Setups/Master Data Requirements.
-
Unravel the mystery behind clearing. Why we use clearing accounts. Find the relevance of word "Clearing" in business context.
-
Collection Float is the time spent to collect receivables. Collection float is the sum total of time taken by Invoice Float; Mail Float; Processing Float and Availability Float. Explore more!
-
The terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger and includes funding and investment activities as well. Learn all about Treasury Management here!
-
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Till reconciliation happens the amounts are parked in 'Cash Clearing Account'.
-
In manual clearing, Bank statement details are to be matched manually considering certain rules. Learn the steps involved in manual clearing of bank transactions.
