CASH FLOW MANAGEMENT

Cash Flow Management

Cash Flow Management

Introduction

The course of the study will focus on the management of cash flows for small businesses and, firms and for the purpose of the study; I will study a small company “Gallant Air Conditioning” and the issues faced by gallant air conditioning in the management of cash flows. During the course of study both primary and secoundry data and reseach were used. Gallant Air Conditioning is a U.K based company that primary deals in the air conditioning units. The company is a specialized distributor of Samsung air conditioners and a dealer partner for Daiken U.K (United Kingdom) Private limited. Gallant air conditioning deals in special (business to business) services in Ventilation, air-conditioning and heating markets. The company also assists and provides consultation services via (CRM) customer relationship solutions (Dropkin 2001, pp.11-27). The management of cash flows is a process of analyzing, monitoring and adjusting the cash flows in business. Especially for small businesses and firms the significance of cash management cannot be overshadowed.

The cash-flow is the portion of the revenue that remains after deducting all expenses in the company. Apart from the profit he has the capital (although expenses but not expenses), the reserves and the increase in long-term provisions. The cash flow is used in addition to the profits for investment, debt repayment and the creation of reserves and is thus a measure of financial strength and profitability of the venture. The most basic function of the cash flow management for small business is the avoidance from possible cash shortages for a business that results from a gap between the outflows and inflows. Any undesired extension of this gap between the inflow and outflow of cash may create difficulties in the operations of a business. Gallant air conditioning is facing problems in managing their cash flows due to the refusal of credit line extension from the “Samsung” and furthermore, banks have refused to grant the loan to the company. Being a small air conditioning company gallant air conditioning has a limited supply of cash and any shortage and discretion in cash will affect the overall business operations of the company.

Literature Review

The management of cash flows is the most important and vital aspect of the all businesses. The effective and efficient management of cash flows is an important aspect for the small companies and firms (Greenfield 1986, pp. 19-34). The operations of a small company a limited and the resources available. Any mismanagement of cash flows can lead the business towards deterioration and eventually it might lead to bankruptcy. Small businesses have a limited supply of cash from which they operates and manage their operations. A healthy cash management ensures that the inflow of cash is greater than the outflows of cash. The cash flow management has further three important functions which are as under;

Operating activities

Investing activities

Financing activities

The cash flow is defined as the sum total of cash flows generated by the firm and, the cash flow from operations is the set of cash flows ...