Cash mai
ntanence & management are the crusial consideration for every concerned undertakings. To continue the regular course of operation for a business unit adiquate maintanence of cash as well as effective utilisation of excessive or idle cash is essential. For any business undertakings, irrespective of self propritorship or partnership or a company, excessive funding over estimated project cost amounts in to loss of opportunity cost & also increases cost of capital. Henceforth, it is importent to evaluate the requirement of liquid cash or cash equvallent to carry on the business function in terms of adiquate provision for bad debt, relation with creditor, market stability for the products in process, availability of the factors of production, current economic condition & political situations etc. However, so far I have discussed upon effects of inefficient cash management. Let's find out few techniques of tactful cash management.
ntanence & management are the crusial consideration for every concerned undertakings. To continue the regular course of operation for a business unit adiquate maintanence of cash as well as effective utilisation of excessive or idle cash is essential. For any business undertakings, irrespective of self propritorship or partnership or a company, excessive funding over estimated project cost amounts in to loss of opportunity cost & also increases cost of capital. Henceforth, it is importent to evaluate the requirement of liquid cash or cash equvallent to carry on the business function in terms of adiquate provision for bad debt, relation with creditor, market stability for the products in process, availability of the factors of production, current economic condition & political situations etc. However, so far I have discussed upon effects of inefficient cash management. Let's find out few techniques of tactful cash management.Firstly, if you find your business is fueled with excessive funding the easiest way for a self propritorship or partnership firm is to take out the excess amount on account of dreawings.However, for big corporate houses (private & public companies) this procedure is a bit complicated. Here disbursment of excessive fund is termes as capital reduction. It is commonly practised through buy back of shares in complience with the respective governing act.
Secondly, in most of the cases & mainly corporate houses maintain a portion of their liquid fund in relatively illliquid invesment portfolio. It also helps them to diversify their source of income as well as appreciate balance aheet figures. Another prospectful aspect of this practise is that it facilitates in quick availability of fund as per requirement. In many times, holding company's stake in subsuderies also comprise of these excess funds.
Thirdly & most commonly major corporate houses often discharged off excess liquidity in terms of higher divident payouts. It also helps in inflating the equity value in the capital market.
Lastly, excessive cash is favorable for a business to the extent of it's effective utilisation. Henceforth, additional fund can be deployed in to business diversifications. As such, in recent days business diversification is a quite handy tool for better business promotion.
Thirdly & most commonly major corporate houses often discharged off excess liquidity in terms of higher divident payouts. It also helps in inflating the equity value in the capital market.
Lastly, excessive cash is favorable for a business to the extent of it's effective utilisation. Henceforth, additional fund can be deployed in to business diversifications. As such, in recent days business diversification is a quite handy tool for better business promotion.
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