Money involves all dealings with physical cash or finances utilized by a business. It is part of the current asset of a business. The process of managing cash for a firm is applied in three aspects. Firstly, the sourcing of adequate capita. Secondly, the utilization of working capital. finally, the procurement of assets and investments. However, cash or Money management can also be viewed in terms of the period of time that is long term financing or short term financing.
In managing the survival of small business, cash in hand and cash at bank, which are basically the most liquid of all assets, must be utilized very well to earn maximum profit for the organization. Yet, there is no particular merit in having thousands of dollars in safe. Simple possession is just a wasted effort.
Proper and adequate management of the money of small business is crucial to the firm’s growth and development, as the measure of asset utilized is its profitability.
The elements involved in money management for a small business should include:
1. Cash Planning: This involves planning of the cash inflows and outflows of the business.this are often referred to as cash budgeting or cash forecasting for all the operations. This makes the control of cash to be possible so as to forestall any future shortage of cash.
2. Managing cash flows: This involves the adequate and proper management of collections and disbursements of cash. To achieve success on managing the cash flow of business, the firm should adopt the principle of “collecting all receipts at the shortest time possible and delaying payments to the last minutes”.
3. Optimum cash level: This involves deciding the appropriate or optimum level of cash balances that will balance the cost of carrying surplus cash against the danger of cash deficiency.
. The success of much small business today can be attributed to effective cash management. Statistics has shown that in the sourcing for funds from banks or other financial institutions, effective money management is a fundamental requirement that would guarantee approval.
In managing the survival of small business, cash in hand and cash at bank, which are basically the most liquid of all assets, must be utilized very well to earn maximum profit for the organization. Yet, there is no particular merit in having thousands of dollars in safe. Simple possession is just a wasted effort.
Proper and adequate management of the money of small business is crucial to the firm’s growth and development, as the measure of asset utilized is its profitability.
The elements involved in money management for a small business should include:
1. Cash Planning: This involves planning of the cash inflows and outflows of the business.this are often referred to as cash budgeting or cash forecasting for all the operations. This makes the control of cash to be possible so as to forestall any future shortage of cash.
2. Managing cash flows: This involves the adequate and proper management of collections and disbursements of cash. To achieve success on managing the cash flow of business, the firm should adopt the principle of “collecting all receipts at the shortest time possible and delaying payments to the last minutes”.
3. Optimum cash level: This involves deciding the appropriate or optimum level of cash balances that will balance the cost of carrying surplus cash against the danger of cash deficiency.
. The success of much small business today can be attributed to effective cash management. Statistics has shown that in the sourcing for funds from banks or other financial institutions, effective money management is a fundamental requirement that would guarantee approval.
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