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
-
Account Reconciliation – How? Learn the three key attributes to perfom account reconciliation.
-
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.
-
Cash Clearing – Accounting Entries
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Learn the steps and accounting entries that gets generated during the cash clearing process.
-
In the previous article we talked about the meaning of the account reconciliations. Now as you now the definition of account reconciliation, in this article let us see why it is carried out.
-
Many different accounts are used in finance. Understand the representation and nature of clearing account in context of accounting, finance and ERP Systems.
-
The objective of Financial risk management is to protect assets and cash flows from any risk. Treasury function works to accurately assess financial risks by identifying financial exposures including foreign exchange, interest rate, credit, commodity and other enterprise risks. Learn about the various risks that are managed by treasury.
-
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'.
-
Technology has enabled the treasury function by providing various solutions to manage it's complicated tasks. This article explains various types of treasury management systems available in the market.
-
What is Invoice to Cash Process
In this article, we will explore the business process area known as; Invoice to Cash; Also known as I2C. Learning objectives for this lesson are: Meaning of Invoice to Cash Process; Sub Processes under Invoice to Cash; Process Flow for Invoice to Cash; Key Transactions Fields; Key Setups/Master Data Requirements.
-
In manual clearing, Bank statement details are to be matched manually considering certain rules. Learn the steps involved in manual clearing of bank transactions.
