CASH

MANAGEMENT
PROCESS
Abela, Lorraine
Ablao, Ara
Silario, Joanne
 OBJECTIVES
• Meaning of Cash Management
• Sources of Cash
• Motives for Holding Cash
• Facets of Cash Management
• Cash Management Cycle
 WHAT IS CASH?
Money that you can access and use.
Can be acquired by selling products and services
Cash equivalents are short-term investments
that can be readily converted into a known
amount of cash.
Cash equivalents are considered the same as
cash in bank.
 CASH MANAGEMENT
Controlling and managing cash -- one of the
most important areas that a company needs to
focus on.
Properly controlled, managed, and available for
the company to meet its obligations.
 EFFECTIVE CASH MANAGEMENT

Ensures the timely provision of cash

resources necessary to support the
company’s operations.
 CASH MANAGEMENT
Controls are built to optimize
enterprise-wide liquidity and ensure
that cash is accounted, safeguarded
and reported correctly.
 SOURCES OF CASH
(INFLOW)
+ Sales
+ Receipts
+ Borrowings / Credit Taken
+ Investment Maturity
 SOURCES OF CASH
(OUTFLOW)
- Purchases – Raw Materials, Goods
- Expenses—Marketing
- Inventory
- Repay Borrowings
- Investments
- Credit Given
MOTIVES FOR HOLDING CASH

Transaction Motive
Precautionary Motive
Speculative Motive
Compensating Motive
 TRANSACTION MOTIVE

To meet routine cash requirements

to finance transactions.
To pay for goods and services.
 PRECAUTIONARY MOTIVE

Held in reserve for unforeseen

fluctuations.
A cushion to meet unexpected
contingencies.
 SPECULATIVE MOTIVE

To quickly take advantage of

opportunities outside the normal
course of business.
 COMPENSATING MOTIVE

To compensate banks for providing

certain services or loans.
Who Handles a Company’s Cash Management?

Corporate Treasurer
Business Manager
FACETS OF CASH MANAGEMENT
Cash Planning
Managing the Cash Flows
Optimum Cash Level
Investing Surplus Cash
 CASH PLANNING

To project cash surplus and deficit

 MANAGING THE CASH FLOWS

Cash inflows should be accelerated

Cash outflows should be decelerated
 OPTIMUM CASH LEVEL

Appropriate level of cash balances

should be decided
Cost of excess cash and danger of
cash deficiency should be matched
 INVESTING SURPLUS CASH

Surplus cash balances should be

properly invested to earn profits
 CASH
MANAGEMENT
CYCLE
Business Operations
Information and Control
Cash Collection
Cash Payments
Deficit
Surplus
Borrow
Invest
 Business
Operations

Cash
Collection
Information Deficit Borrow
and Control Surplus Invest
Cash
Payments
 QUIZ
ANAGRAM (super easy)
1. Shac gemmatenna
2. Onsactranti metivo
3. Slase
4. Ventoriny
5. Sesnepex
6. Conticello
7. Buriedsments
8. Hacs Folwin
9. Asch Utowolf
10. Peracorot Seatsurrer
1. Cash Management
2. Transaction Motive
3. Sales
4. Inventory
5. Expenses
6. Collection
7. Disbursement
8. Cash Inflow
9. Cash Outflow
10. Corporate Treasurer