Cash is money that is easily accessible either in the bank or in the business. It is not inventory, it is not accounts receivable, and it is not property. These might be converted to cash at some point in time, but it takes cash on hand or in the bank to pay suppliers, to pay the rent, and to meet the payroll. Profit growth does not always mean more cash.
One of the major factors to poor cash management is that start-up businesses often find themselves short of cash, right off the mark. Small business owners often say that an inability to control cash is their single biggest problem. One of the most important advantages of having positive cash management is that it gives a small business, security in unstable times. It also gives a business an opportunity to take advantage of strategic investments, or take advantage of opportunities to reduce costs. It should be noted that small businesses also have to focus on the concept of free cash flow in order to establish that cash cushion. It is important to understand that financial accounting is not focused on cash flow. It is focused on net income or profit. Many small business experience cash flow difficulties, especially during their first years of operation. But entrepreneurs and managers can take steps to minimize the impact of such problems and help maintain the continued viability of the business.
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- What are the different types of Mutual Funds by Structure?
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