Cash Management

Loading the player...

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.

 

BREAKING DOWN '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. Receivables

    An asset designation applicable to all debts, unsettled transactions ...
  4. Hubris

    The characteristic of excessive confidence or arrogance, which ...
  5. Automated Clearing House - ACH

    An electronic funds-transfer system run by the National Automated ...
  6. Insolvency

    When an individual or organization can no longer meet its financial ...
Related Articles
  1. Entrepreneurship

    The Best Banking Services for Your Business

    Find out which banking services can offer a small business the best opportunities for reducing cost and fraud while managing its cash flow more efficiently.
  2. Investing Basics

    Understanding Cash Management

    Cash management is a broad term that applies to the collecting, managing and investing of cash.
  3. 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 ...
  4. 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.
  5. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  6. 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.
  7. 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.
  8. Economics

    Why Enron Collapsed

    Enron’s collapse is a classic example of greed gone wrong.
  9. Investing Basics

    Corporate Dividend Payouts And the Retention Ratio

    An investor can use dividend payout and retention ratios to gauge an investment’s possible return, and compare it to other stocks.
  10. Investing News

    How Banning Buybacks Would Help the Economy

    Stock buybacks are popular, but they're not helping the economy. Here's what would happen if they were banned.
RELATED FAQS
  1. How does bank reconciliation affect a cash control policy?

    Bank reconciliation is a necessary process to identify potential errors, fraud or irregularities, and it enables the company ... Read Full Answer >>
  2. 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 >>
  3. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  4. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  5. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  6. 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 >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center