Cash is essential to business. Cash circulates through the business from Capital to investment in establishing sales of a finished product after incurring costs like Cost of production, Administrative cost, Sales and Marketing cost, Tax payments etc.. Hence, it is only right to compare Cash to Blood in our body which delivers essential substances like oxygen / nutrients to the body’s cells and transports metabolic waste products away from those same cells. There is no substitute for blood. It cannot be made or manufactured. So is CASH. Hence, liquidity in the business should also be rotated with the same frequency as it is committed in the organization. Use of technology has enabled efficiency in many areas of life. The same should be applied diligently by all business owners to enable the lifesource of the business, CASH, to sustain its presence at all points of business activity.
What should be the criteria for proper liquidity management
Availability – Ensure availability of liquidity is duly documented and provided for decision making
Rationality – Provide means to identify excess or insufficient flow points
Lower cost impact to business – Focus on Cost of leveraging
Effective Flow Coverage – Ensure that all points of sources of inflows are considered in the Cash flow model adopted
Effective coverage of Business needs - Ensure that all points of sources of outflows are considered in the Cash flow model adopted
Accuracy – Probability factor for flow blocks should be duly provided for in the Cash flow model.
Customized to Industry or your business operation style – Management style and Tone at the top to be duly adjusted to best practices for Cash flow Management support.
Support Integration with ERP Technology for seamless CASH - FLOW reporting
Technology Based Controls