Optimization of the company's cash flow

First, to assess more than just the financial needs and, thus, save Bank Charges by an optimal choice of shortterm
financing;
Then, in the case of structurally credit companies over a long duration, to establish the possibilities of
blocking of funds in volume and duration, in the most appropriate jobs;
Finally, in the case of companies structurally debtor for the coming period, to measure the lack of permanent
capital.
The problem for the company now is to assess the cost of its mismanagement of cash.
3 - THE ASSESSMENT OF COSTS IN THE TRADITIONAL CASH MANAGEMENT.
By ignorance of the amounts actually available, the company has paid unnecessary costs because it has supported
one discovered and funded from surpluses. In addition, through the days of value formed the "float". Float and idle
cash create chances for more costs.
1) - Evaluation of unnecessarily paid charges.
The minimum amount of “Bank Charges”* can save by improving cash management can be calculated as follows. It
totals for all banks and on throughout the year, the value of the balances on the one hand, and the value of receivable
balances, on the other hand. Each result is affected by its cost: the rate of discount for balances; the difference
between overdraft rates and rates of discount for debit balances.
TOTAL COST =
∑ TOTAL CREDITOR X (THE DISCOUNT RATE / 36.000) +
∑ TOTAL DEBTOR (THE OVERDRAFT RATE – THE DISCOUNT RATE) +
∑ 1/20% X
(STRONGEST OVERDRAFT OF THE MONTH USING A UNSUFFISANT DISCOUNT) –
(STRONGEST OVERDRAFT THAT DOESN’T AVOID STRICT MANAGEMENT)
Yet, this formulate is still considered as theoretical on the realistic field of companies and financial management; the
reason behind, is that the company’s financing condition are too different to be managed by such a complex
formulate, from another side, the activities of the company are too sensitive to any fluctuation of flows or time, for
that, the management goes with a simple arbitrage that the company does when they compare between the financial
costs paid on the behalf of the loan lines in few banks that they contracted, and the amount of financial profit that
they make from paying their suppliers in cash. Therefore, the company works on covering the financial costs of the
bank overdraft. And it works as the following example:
In the BMCI and AWB accounts, the company has in total 33.000.000 DHS of Overdraft. While the company makes
0.5% of the cash paid amount to the supplier INWI (that is considered as the main supplier of the company since it
represents 99% of the company’s turnover
The company gains in the financial costs: 0.5% of the paid amount (when it’s Cash). And they pay 5.35% of financial
costs when they use the Permanent Overdraft (authorized). Knowing that the 0.5% is a daily rate, the annual rate
will be equals to 6%, and the daily rate that the company use to pays its costs will be then: 5.35%
Annual Rate = Daily Rate x 12. And Daily rate = Annual rate / 12.
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