Question

invent in detail all the tools we use for managing our cash flows. Include all our accounts that are mediated through banks and finance companies. Also, list our cards issued by banks, such as debit or ATM cards, and identify any direct deposits and automatic payments that are made through our savings and chequing accounts. How might we further enhance our cash management through the use of banking tools?

Answer 1

The tools we can use for managing the cash flows include:

· The cash outflows are to be anticipated in order to know the expenses that are being incurred for the purpose of payroll, rent etc.

· The annual sales are to be forecasted by keeping in mind the credit policy.

· The short term financing such as the line of credit can be used for the purpose of managing the requirement of cash thereby managing the receivables and payables.

· The separate account of business needs to be maintained in the business for drawing the cheques, drawing the salary and paying them in order to effectively manage the business.

· The credit cards can be used for the purchases of the business and it will help in managing the purchases and also the cash flow budget.

· The cash outflows can be well managed with banks by providing instructions to them for specified payments from the bank accounts in order to avoid the late payments.

The cash management can be well done by using the banking tools as various sources of bank finance such as the long term loans can be used to finance the purchase of the long term assets in order to reduce the cash outflow.