Cash and Liquidity Management
Cash and Liquidity Management contains two separate areas of functionality: Cash Management and Liquidity Planning. Cash Management focuses on cash movements between bank accounts and looks at cash flows in the short term. Liquidity Planning encompasses activity in the subledgers (accounts receivable, accounts payable, and the materials ledger) that have an impact on cash flow in the mid to long term.
Here’s an example of how analyzing one of the subledgers impacts a company’s cash flow. Assume a company has on average two months’ worth of inventory (as it relates to sales turnover) in its warehouse at any given time. This inventory level is valued at $2 million, which translates to $2 million in cash being tied ...
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