Optimization of the company's cash flow

Manage cash consists, in the traditional design, on determining the amount of cash to hold at the beginning of the
period which, taking into account the revenue and expenditure of the global businesses that the company exercises,
will be necessary for the implementation of the budget. Theoretical solutions to this question found in the literature,
are many and varied. This is explained by the relative ease with which one can model optimization problems, thanks
to the existence of mathematical tools of investigation already in use also. In this case, the authors have transposed
the logic of analysis of the inventory control, quantitative analysis of the Keynesian approach of 'preference for
liquidity.
This problem is equivalent to setting the conflict between, on the one hand, excessive cash that involves an
opportunity cost, and, on the other hand, insufficient cash resulting in a cost of insolvency. However, although
appealing intellectually, this approach is based on a number of explicit and implicit assumptions that practice
business is not checked. Maintaining important liquidity goes against the objective of cost-effectiveness insofar as
the funds tied up in liquid assets have in general no, or very low profitability. In addition, a plentiful cash cannot be
in any case, contrary to what was long stated, as the guarantee of financial security of a company, i.e. nor as a
guarantee of its solvency, nor as the insurance of its autonomy.
The security of a business depends above all on the cash flow released that it is capable of secreting, or if one prefers
its potential to restore liquidity. Its profitability is therefore the necessary condition for its security. But we will see
that this condition is not sufficient. Solvency and profitability do oppose no more long term in the short term.
The company must exercise a tight administrative control to manage its cash flow. The synchronization of the cash
flows and the choice of day to day financing, on the one hand ensures the solvency of the firm and on the other to
improve its profitability. Indeed control of cash forecasting, financing in the short term, as well as the coordination
of banking to aim at the reduction of monetary assets to zero. This is what we will show in the three sections that
follow.
In other words, a company that has permanently cash void or fluctuating slightly around zero can be considered, in
the first analysis, financially well managed. This means, all other things being equal, as makers:
Master cash flows
Effectively reallocate cash flow released in profitable jobs,
Enjoy more than just their funding needs,
Negotiate the best terms of Bank.
I’ll try to show in this part that by minimizing the volume of monetary assets, the company reconciles the objectives
of security and profitability. This goal will be achieved in conditions of liquidity and profitability by an extensive
improvement of cash forecasting.
SECTION 1: MONETARY CASH FROM THE FIRM.
The company’s business activity must keep a certain "stock of currency", to deal with all moment to the expenses
that it must or wish to achieve.
I - PREFERENCE FOR LIQUIDITY AND INVENTORY MANAGEMENT.
If we could predict the future perfectly, and disbursements were synchronized to the receipts, it would be
unnecessary to provide a pool of means of Exchange.
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