February 2007
Intermediate to advanced
456 pages
15h 57m
English
Content preview from The New CFO Financial Leadership Manual, Second Edition
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Chapter 12. Cash Management
Cash management is absolutely crucial to the operation of any but the most wealthy organizations. If there is ever a cash shortfall, payroll cannot be met, suppliers are not paid, scheduled loan payments will not be made, and investors will not receive dividend checks. Any one of these factors can either bring down a business or ensure a change in its management in short order.
In order to avoid these problems, this chapter covers how to construct a cash forecast and automate the creation of some of the information contained within it, as well as how to create a feedback loop for gradually increasing the accuracy of the forecast. We also describe a number of methods for controlling cash flows in order to avoid any shortfalls, how to invest excess funds, and how to use various cash management and natural hedging tools.
Cash Forecasting Model
The core of any cash management system is the cash forecast. It is imperative for the management team to be fully apprised of any cash problems with as much lead time as possible. The sample model shown in Exhibit 12.1 is a good way to provide this information.
Table 12.1. Cash Forecast
For the Week Beginning on | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
11/4/06 | 11/11/06 | 11/18/06 | 11/25/06 | 12/2/06 | 12/9/06 | 12/16/06 | 12/23/06 | 12/30/06 | Jan-07 | Feb-07 | Mar-07 | ||
Beginning Cash Balance | $1,037,191 | $1,034,369 | $968,336 | $967,918 | $918,082 | $932,850 | $918,747 | $829,959 | $834,924 | $754,124 | $808,592 | $798,554 | |
Receipts from Sales Projections: | |||||||||||||
Coal Bed Drilling Corp. | $16,937 | $174,525 | |||||||||||
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