Obtaining A Cash Flow Management Strategy

The success, growth, progress and development of every organization both Non-profit and profit making solidly lies on "Management Strategies  employ in handling the organization cash flow (fund). Cash flow is primarily the difference between cash coming into the business and cash going out during a given time period in an organization. Money is very important to any business enterprise irrespective of the size. Close control of money is of great essence. A common cause of failure of business organization is poor cash flow management. Cash is often said to be a business as blood is to the human body. It is the life given fluid that keeps the business going.

However, just because blood circulates through the body does not ensure a good blood pressure. The same is true for a business generating sales revenue does not ensure that the business is profitable. The major sources of cash for most business are revenue either as direct sales or collection of receivables. Others sources are sale of assets, borrowing, additional investment by owner.

For many businesses, cash flow is a big problem to successes. Effective cash flow addresses both short term and long term. Planning. It is practically impossible to iron out all the discrepancies in cash flow and do a perfect job of controlling and coordinating movement of cash in businesses. But it is possible to develop an understanding, appreciation and consciousness of cash flow. This is often the first critical step in managing cash flow of a business.

Cash flow must be planned in advance in anticipation of certain changes in income and expenditure. Monitored to make adjustments to business and financial operations. Managed to "average" out the peaks and valleys of cash flow. Specifically, cash flow management strategy includes the practice of the following:
• Decrease the amount of money owned.
• Cut out excess over head expenditure.
• Keep close eye on inventory.
• Review owner's drawings.
• Consciously structure the payment of your bills.
• Continually update procedures.
• Develop good record keeping system

Cash flow management strategies also take consideration of cash flow project/forecast; Cash flow projection is a working document which provides detailed month by month picture of the investment of funds in and out of the organization. A sufficiency of cash which is a life blood of the system is vital for every business. Even if a business is fundamentally profitable, it cannot survive without sufficient cash.

Cash flow projection recognizes inflows and outflows of cash based on the time they are actually expected. Cash flow forecast assists in planning,  monitoring and evaluation. The cash flow forecast is divided into three sections; The first section records all sources of cash that is expected into the business at the actual time they are expected; The second section reports all cash outflows that must be made within that period at the actual time they are expected to be made; The third section shows the net change in cash flow (i.e  between inflow and outflow). Only transactions that involve actual movement of cash are recorded in the forecast.

Finally, cash flow management is critical to business concerns; but is probably most critical for business whose trading can be seasonal or unpredictable. It is often said that "it takes money to make money". It should be more often said that "it takes money today to make money tomorrow".