Cash Management

AAA

DEFINITION of 'Cash Management'

The corporate process of collecting, managing and (short-term) investing cash. A key component of ensuring a company's financial stability and solvency. Frequently corporate treasurers or a business manager is responsible for overall cash management.


Successful cash management involves not only avoiding insolvency (and therefore bankruptcy), but also reducing days in account receivables (AR), increasing collection rates, selecting appropriate short-term investment vehicles, and increasing days cash on hand all in order to improve a company's overall financial profitability.




INVESTOPEDIA EXPLAINS 'Cash Management'

Successfully managing cash is an essential skill for small business developers because they typically have less access to affordable credit and have a significant amount of upfront costs they need to manage while waiting for receivables. Wisely managing cash enables a company to meet unexpected expenses in addition to handling regularly-occurring events like payroll.

RELATED TERMS
  1. Accelerated Reply Mail - ARM

    An expedited delivery of business reply mail offered by the U.S. ...
  2. Disbursement

    The act of paying out or disbursing money. Disbursements can ...
  3. Automated Clearing House - ACH

    An electronic funds-transfer system run by the National Automated ...
  4. Wire Transfer

    An electronic transfer of funds across a network administered ...
  5. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  6. Insolvency

    When an individual or organization can no longer meet its financial ...
RELATED FAQS
  1. Which financial instruments have par values?

    Short-term investments can include a number of possible investment vehicles. Marketable equity securities are just one of ... Read Full Answer >>
  2. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  4. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>
  5. How do companies identify and manage business risk?

    In each stage of the business life cycle, companies face both internal and external risks that can have detrimental effects ... Read Full Answer >>
  6. How do the C-suite members work together to make a successful company?

    Corporate managers, typically chosen by a board of directors in large organizations, are ultimately responsible to stakeholders ... Read Full Answer >>
Related Articles
  1. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  2. Entrepreneurship

    Small Business: Speed Up Receivables To Avoid A Cash Crunch

    Waiting for customers to pay can be a losing game. Look to factoring for quicker cash.
  3. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  4. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  5. Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  6. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  7. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  8. Investing News

    A New Corporate Governance Initiative In Japan

    Expectations are low that Japan can create a corporate governance climate that meets global standards, but a new initiative is aimed at doing just that.
  9. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  10. Stock Analysis

    Qualcomm's New Buyback Program Is Well-Timed

    Qualcomm announced after market close on Monday that they had approved a new stock buyback program, authorizing to repurchase $15 billion in shares.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center