What is Cash Management?

Cash management is the activities of controlling, performing financial operations and planning r related to the cash inflow and outflow of the business. Cash management includes all methods and plans for managing financial resources effectively.

In an enterprise, different activities and departments are intricately linked with each other, as well as with stakeholders. Therefore, good cash flow management plays an essential role in ensuring the financial health and sustainable development of enterprises, especially SMEs.

Cash Management in Business

1. Bank Account Management

Many SMEs, especially export and import SMEs, often use more than two banks for different purposes. Managing multiple accounts at the same time with complicated transactions has become an obsession for many businesses.

Thanks to the support from the bank management function, SMEs can open accounts, close accounts, process inter-bank transactions, apply for a loan, etc., easily. All related transaction history will be stored, allowing transaction inquiry, reconciliation and exporting reports when needed. Besides, SMEs can control the gap between account balances in different banks to plan appropriate cash-flow management.

2. Receivable Management

Receivables are the capital of SMEs that are being held by other parties. Receivables can be goods and services sold but not yet paid (trade receivables), or unpaid amounts resulting from insurance, employees, etc. (non-trade receivables)

If SMEs do not handle receivables well, they might lose money. Many SMEs have high revenue on financial statements but do not receive money on time, leading to a shortage of money for business activities, affecting working capital capability, and further, the financial plan of the business.

The receivable management function supports SMEs with payment reminders, inquiries about incoming transactions, matching transactions with invoices, automatically updating information based on invoices, etc. The automatic payment reminder and matching functions will eliminate the possibility of missing receivables and save time in invoice processing.

3. Payable Management and Payment Processing

Contrary to receivables, payables are the capital of other parties that is appropriated by the business. Payables partly reflect the outflow cash of the SMEs, including unpaid invoices from suppliers, vendors, loan providers, etc.

The payable management function will send notice of due-date invoices; process one-time payments, recurring payments, bulk payments, reconcile information, make and notify payment schedule, check payment history, etc.

Paying off debt on time will help SMEs save significant costs. For example, having a reasonable payment plan will help businesses avoid fees such as interest on late payments, overdrafts, overdue loans, etc. charged by banks and partners.

4. Cash Flow Forecast and Planning

On a monthly or quarterly basis, the Finance department and management levels need to make plans for optimal usage of available cash flow in the company. However, in some cases, the lack of forecasting information might be a barrier to the planning process, and make it difficult for stakeholders to plan properly. Understanding that barrier, the cash-flow forecast function has been developed. This function includes cash-flow forecasting, budget planning and payment schedule based on available information.

As mentioned above, the shortage of cash might lead to a financial deficit in business activities, affecting working capital capability, and further, the financial plans of the business. However, the surplus of working capital is also not a good situation, as it proves that the business has not made optimal use of its capital. Forecasting and planning functions enable SMEs to allocate, optimally keeping a balance of inflows and outflows cash optimally, preventing financial issues in business due to deficit or surplus of cash.

As a Growth and Finance Hub for SMEs, GroBanc offers business management software and a wide range of cash management solutions from reputable providers and partners that help SMEs manage their cash flow effectively, achieve financial stability, save cost and maximize profit.

GroBanc – The Growth and Finance Hub for SMEs