What are the five basic principles of cash management?

Answer 1

The 5 basic principles of cash management include:1- Increase the speed of receivables collection; by lowering the average collection period for funds, you will have more money to use for operations or investing. Offering a discount for early payment is one method that can be used to speed up the payment process.2- Keep inventory levels low; maintaining the proper levels of inventory are crucial to maintaining your available cash levels. The cost of inventory and warehousing it is a huge expense; this is why right-on-time is a good way to go if it is feasible for your company. It is also important to consider the shelf life and the depreciation of your products. Most foods have a short shelf life, and items such as computers and computer related items have a fast depreciation rate. 3- Monitor the timing of payment of liabilities; you should take advantage of the full payment period, but do not pay them late, this could damage your credit rating.4- Plan timing of major expenditures; you should plan the timing of major expenditures; they should be made when you normally have excess cash which is typically during the slow season.5- Invest idle cash; leaving cash in your safe will earn you nothing. Letting large amounts of cash just sit without reinvesting it is not good money management.