Jumat, 26 Februari 2010

Cash Management - Why should we know the cash position of company!

The importance of understanding the daily position of cash the company can not refuse. It is very important for us to make the next step in business, either to prepare the payment of our suppliers or expenditure, to invest our funds more than short-term or just for our own knowledge to know that we a race track and our financial position is healthy.

To demonstrate the concept, suppose that we are driving a car and the first thing we can do is watch the fuel gauge on the dashboard of the vehicle. What matter most is the information of fuel in that time if we can still continue driving or have to stop at gas station next to refill the tank. The data is not gasoline last week the last month or data is the care of us, we want the car tank position now to make the decision to stop the next gas station or not. It applies the same concept that refers to the cash position of the company. What we really want is the cash position of company now and not last week or last month of data. Historical data and can not be used to make a decision if we are prepared to pay or invest funds than short-term investments.

Basically, I just wanted to share with you three kinds of data box which usually familiar with it and to some extent we can use the data. The first tip is the cash flow statement of the end of the month. This is the most popular and recommended of all book accounting and academia. The cash flow statement is usually derived from the Balance Sheet and Profit and Loss Account for the month. While reports of cash flow developed with this concept is correct and in accordance with Accounting Standard, we need more reports that can give us more meaningful daily reports of cash flow for us to make daily financial decisions.

Here comes the second method of cash flow data is called daily cash position. Taking into account the daily examination of incoming and daily checks disbursing the cash balance will show a cash position at any point in time. The third method is the most dangerous way is to call the bank and requested the cash without comparison to daily cash position, as explained in the second method above.

The most difference between the second and third method is the bank balance now is not the same daily position of cash. This is because the checks that we have paid is not necessarily all presented on that day and the bank balance including checking our checks not redeemed or preparation not deleted by the banking system . If we make decisions on bank statement only, will surely act as a time the bomb was fatally destroyed his business. Bank balance found due to a miscalculation of the check ready.

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