The cash manager is the person in a business who is responsible for the control and execution of all the payments, such as salaries, tax authorities and supplier payments. These must be made under the strict regulations of company procedure and policies. The cash manager looks after the flow of many customers. To manage the organisation’s payments or expenses, the cash manager should be aware of the flow of money in and out, to plan future expenses. For example, they should know when the salary is to be paid, maintenance charges, expenses on machines, and when the clients will pay for the products they purchased or the service provided. 

Examples of cash management 

Different types of companies have their own ways of cash management. For example:

  • Companies that have multiple subsidiaries mostly have a fragmented and complicated account system, and because of this, the cash flow is divided into several accounts. Some of the corporate banking systems, for example, cash pooling, make the cash flow into other small accounts, so that it is easy to make the internal funding through the main account or concentration account. Hence cash pooling helps the organisation simplify cash flow, which results in not taking any help from the external source which ultimately turns out to be more costly. 
  • Companies like tax authorities or telecom companies have to deal with many small payments in the market. Thus, sending out bills or generating bank statements must be automated. In such situations, the cash manager has a vital role in their operation. 
  • Companies that work internationally or are aiming to work internationally have to make payments worldwide. Because of this, such companies should possess multiple accounts in different banks, and it will be the duty of the cash manager to look after these international payments. 
  • International e-commerce companies focus on customers worldwide and offer easy payment methods. This helps them to gain more customers because of easy payment methods. 

Types of cash management

Cash management in India is mainly done through paper-based systems, such as cheques. The electronic movement of money is also widely used, but cheques are still the primary way of transferring money in India. Here are a few ways of cash management done in India. 

  • Upcountry own branches location cheques
  • Transfer cheques 
  • Cash collection 
  • Ad hoc location cheques 
  • Upcountry correspondent bank branch location cheques 
  • ESC direct debit 
  • Capital market IPO collection
  • Local high-value cheques
  • Pay orders 
  • ESC credit 
  • Capital market IPO payment 
  • Own branch location demand drafts 
  • Cheques
  • Intra bank payments 

The basic principles of cash management 

Inventory management 

A higher quantity of raw materials or huge stocks means less liquidity because of trapped sales. Thus, an organisation must find better ways to take out the stock to make the cash flow constant. 

Receivable management

After raising an invoice, the credit period or the time taken to receive the payment is between 30 to 90 days. The organisation has completed the sale in such cases but still has not received the cash transaction.

Payables management 

Payables management is also equally crucial. It is the situation when the organisation or a company has purchased materials on credit and has to make the payment within a fixed period. Organisations are also eligible to take credit from banks and financial institutions for a short period. To do this, the organisation has to make sure that the payment is done in due time and maintains a good liquidity position, which ultimately helps them in timely payments of debts. 

Causes of problems with cash management 

Many organisations have poor cash management, and many factors affect good cash management flow. 

Poor understanding of the cash flow cycle 

Organisations should have a clear understanding of the timing of cash outflows and inflows, such as knowing when to buy raw materials and when to complete the due payments. When an organisation has good and rapid growth, it might run out of money due to purchasing more raw materials or inventory. 

Lack of understanding of profit vs cash 

For organisations that are fast-growing and generating revenue, it doesn’t mean that they have received the cash payment. So, an organisation that requires a lot of inventory or raw materials may generate good revenue but not receive the necessary amount of cash flow. 

Lack of cash management skills 

An organisation needs to have skilled cash managers to tackle all the aforementioned issues. The manager should have the ability to manage and optimise the working capital, which includes discipline and having proper frameworks to make sure that the receivables are received on time. The due is paid before the scheduled time. 

Conclusion 

The cash manager looks after the monetary logistics and manages the inflow and outflow of cash in the company. The case manager decides the channels and the storage units for the money flows, and they also look after cost optimization, visibility, availability, and cash control. They have regular communication with the other departments, such as colleagues in treasury, accounting, finance, manufacturing, and sales. Without a cash manager, it would be hard for any organisation to function in the market.