Optimization of the company's cash flow

When the company is able to predict with certainty its timelines in a way that it corresponds exactly to its forecast
of receipts, the Treasury management may be optimal. Indeed, the costs could be reduced to a minimum since it will
not need to hold liquid assets low performance - cash-, or have means of long-term financing exceeding those which
are essential - the Working Capital Fund. However, the forecasts are in reality, uncertain. Combining with forecasts
of cash a probability, managers can estimate the risk of technical insolvency and deduce a safety margin. This safety
margin is composed of a steering wheel of cash and a positive working capital fund. The value of the Working Capital
Fund and the level of cash are interdependent. A company that finances all its current assets net of the liabilities by
long-term capital less will need cash if it had financed with short-term credit.
The choice of the means of financing of current assets and the share of liquid to maintain assets are closely linked.
As well as in theory. The volume of permanent funds for the financing of current assets affects the liquidity of the
company: working capital is the expression of this liquidity. However, over the restraint of funds is important and
less the deal is profitable, ceteris paribus. Similarly, more detained cash is strong and more company's security is
guaranteed, but the return on assets is weakened even. The objective of the financial manager is therefore to define
a balance between liquidity and profitability.
Also, to increase the margin of safety of the company, it can only increase the proportion of its cash, or extending
the maturity of its debt. These two actions affect the profitability of the company. This vision’s resulted in the level
of the cash management to find an optimum balance guarantee of solvency. Financial balance, on the one hand,
between jobs and the resources of the Working Capital Fund is the essential criterion of analysis. Monetary balance,
on the other hand, between input and output of cash flows whose cash is the warranty.
In fact, the problem of the cash management arises in other words. Contrary to common opinion the objective of
profitability does not preclude the maintenance of liquidity. The optimum lies in the joint improving the security and
profit, which represents the contents of the policy's cash. Cash policy combines the constraints of safety and
profitability by minimizing the volume of monetary assets. A company whose cash fluctuates continuously slightly
around zero indicates, all other things being equal, than those responsible:
The good management of Cash-Flows
Integrate with efficiency the profitable stable funds applied
Evaluate with exactitude the needs of financing
Best negotiation of bank’s conditions
We have shown that without disappearing totally uncertainty receipts and disbursements can be significantly
reduced and is no longer warranted, at any rate, the detention of a "mattress" of liquidity. Knowledge of the behavior
of the cash flows that pass through the undertaking, i.e. changes in the bank balance, is above all a problem of
information. The search for this information is available to all firms.
The bank loans of “Repairs” for urgencies; short term and small amount, correct the mistakes taken on the level of
the predictions related to the synchronization of the Inflows and Outflows of funds. The rational uses of these loans
need a special attention in a way that they could be adapted to the needs of the company, in addition of the
conditions of the bank account.
Cash policy, moreover, confirms that profitability is the pledge of liquidity for a certain due term. The cash balance is
unstable. The business daily questioned its solvency. Such small business that hires a framework "too expensive" will
adversely affect its liquidity. Such other average firm will file its balance sheet for having accepted a too ambitious
contract, in the view of its possibilities. Such large firm will be absorbed to have exaggerated the use of suppliercredit.
The deadline is daily. We have tried to show that the control of this situation is not only by the control of changes in
the bank balance but also monitoring of the operative events for cash flows:
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