Identifying And Manging Cash Flow Exposures

Cash flow is nothing but the movement of the fund in and out of the company. Cash is the lifeblood of business. When there is a freeze in cash flow the business stops.

 The fund which comes inside  into the company are called as cash inflow, whereas those fund that goes out of the company are called as cash out flow. Funds that are raised from sales of goods and services are example of cash inflow, whereas funds that are allocated for interest and tax are example of cash outflow. In order to sustain in business the fund manager must be in a position to identify the cash movement of the business. If the cash movement is not properly monitored then that will result in the total collapse of the business. Once a proper stage is set to identify cash flow, it is important to manage them. The improper management of the cash flow will lead to the early exit from the business. It is therefore important to identify the cash flow as well as manage them. These two process combined together is know as cash flow management. Cash flow management is easier in case of smaller business, whereas the complexity increases with the increase in size of the business.

Some of the steps that are followed while managing cash flows are,

• Understanding the cash flow is the first and foremost step in managing the cash flow. Without proper understanding it is impossible to identify the cash flow.
• The second stage in management of cash flow is to analyze the cash flow. This will help in understanding the problem areas in business cash flow cycle and helps the manager to over come that problem.
• The next stage is to do a proper budgeting of the cash flow. Budgeting can be done for the next 6 months or even the next year.
• The next important stage in cash flow management is to improve the cash flow. Improvement is the only mantra for development in any business. Improvement must be shown in the cash flow as well. The best strategy that is adopted in the improvement of cash flow is to fasten the inflow and delay the outflow of the cash.

It is important for the managers to identify and manage the cash flow for the successful running of the business.