Cash flow management of an enterprise should take into account the specifics of its financial and economic activities and the specific conditions of the external and internal environment of functioning. However, this individuality is achieved through the use of a set of common approaches, techniques and methods.
management Cash flow is one of the main activities of the enterprise. Cash flow management includes calculating the time of circulation of cash (financial cycle), analyzing cash flow, forecasting it, determining the optimal level of cash, drawing up cash budgets, etc.
Cash flow management is divided into strategic and operational (tactical) management. Stages ofmanagement cash from strategy to tactics:
- Long-term planning of the enterprise (business plan) for 3-5 years. The plan is based on the long-term goals of the enterprise, with the highest level of detail.
- Annual budget broken down by month. The budget is based on a long-term business plan, taking into account the current macroeconomic situation and the capabilities of the enterprise, with an average level of detail.
- Cash plan for a month. It is built on the basis of the annual budget, taking into account the current situation of the enterprise, a deep level of detail.
- Payment calendar for the month with a breakdown by day. It is built on the basis of a cash plan, the maximum detailing of receipts and payments.
The financial viability of the enterprise to ensure compliance with the timely execution of current obligations by forming the necessary funds on the basis of cash flows at a certain point in time and with a given absolute value is carried out through tactical cash flow management.
The enterprise should carry out tactical management of operating cash flows in the following areas:
- search for ways to increase incoming cash flows (cash receipts from the sale of products, provision of services);
- decrease in outgoing cash flows (operating expenses);
- reduction in the duration of the cash gap (financial cycle of the enterprise);
- synchronization of incoming and outgoing cash flows in time.
The basic provisions of the organization of tactical management of enterprise cash flows are as follows.
First, cash flows cannot arise with the passive economic behavior of an enterprise. Consequently, it is necessary to carry out certain measures to form cash flows and influence their parameters – to manage cash flows.
Secondly, cash flows are an integral part of the financial and operational cycles, requiring the coordination of financial decisions in the field of cash flow management with other areas of financial management.
Third, the management of cash flows requires the appropriate content of the system for making managerial financial decisions.
Fourthly, cash flow management presupposes the unambiguous interpretation of the financial decisions made, the clarity of their communication to the performers and the provision of adequate feedback – monitoring, reviewing and adjusting financial decisions.
The organization of tactical management of the enterprise’s cash flows should be carried out in compliance with a certain set of general principles, the main of which are:
- information reliability, which provides for the timely and complete provision of financial information on the operational, investment and financial activities of the enterprise, structured in accordance with the needs of the enterprise, or consideration of a separate management financial solution;
- balance – reasonable use for the needs of cash flow management criteria and methods of grouping, summary and generalization of the company’s cash flows;
- efficiency – determination of the optimal level of distribution of funds in space and time in order to minimize the costs of achieving the desired effect (for example, maintaining a certain level of liquidity), etc.
Tactical cash flow management of an enterprise includes the following main functional elements:
- formation and acceleration of incoming cash flows;
- concentration of cash inflows;
- control over the formation of outgoing cash flows over time;
- forecasting and planning cash flows and enterprise liquidity;
- formation of a monitoring system, management and control of liquidity and solvency of the enterprise;
- optimization of the use of temporary surplus of funds at the disposal of the enterprise.
Cash flow management tactics should be considered as a complex concept, in the structure of which it is possible to distinguish:
- goals and objectives of cash flow management;
- main directions of cash flow management;
- criteria for making managerial financial decisions;
- methods for quantifying cash flows;
- forms of cash flow management.
The most effective tactical cash flow management tool is a payment calendar. With its help, it is possible to predict the receipt and expenditure of funds, to identify in advance a pessimistic scenario for the development of the situation and to justify possible options for its correction.
The payment calendar covers the movement of all enterprise funds, the bulk of which passes through the enterprise’s bank accounts. It is compiled for a quarter with a breakdown by months or a month, broken down by decades or weeks.
Information support for the preparation of the payment calendar are:
- plan for the sale of products (goods, works, services);
- cost estimates and contracts for the supply of material resources with suppliers;
- bank statements from the company’s accounts for previous periods;
- the terms of payment of wages, bonuses, etc. agreed in accordance with the current legislation. workers and employees of the enterprise;
- terms for making payments to the state budget and off-budget state funds;
- data tax accounting on tax payments and fees to budgetary and extra-budgetary trust funds;
- loan agreements with banks regarding the terms of obtaining and paying loans and interest for using them;
- data accounting on the status of receivables and payables;
- the amount of accrual and the timing of payment of wages;
- operational materials of supply departments, sales, other functional divisions on the receipt of funds at the enterprise in the appropriate time frame or the need for funds arising during this period.
The development of a payment calendar must begin with the income part in order to be able to actually fulfill the expense part.
The degree of detailing of all information included in the payment calendar is determined by the company itself, based on the specific emerging payment and settlement situation. In any case, the balance (balance) of the current account in the bank and the amount of cash on hand, since it is their size that determines the solvency of the enterprise at each given moment in time, or a negative value formed in the event of a shortage of current receipts of funds to cover the expected payments.
Thus, the tactical management of the enterprise’s cash flows should be aimed at ensuring the completeness and timeliness of covering the company’s capital needs to finance its operating, investment and financial activities. Particularly relevant at this point in time for many enterprises are:
- timely and full repayment of bank loans;
- maintaining an acceptable level of solvency and liquidity, as well as preventing the formation or development of a financial crisis;
- an increase in incoming cash flows as the main source of financing for an enterprise and their optimization in the context of types;
- reduction of the cycle of turnover of funds;
- maintaining an adequate balance between the formation of a liquidity reserve and missed alternative opportunities, ensuring the effective use of the company’s funds through their best distribution in time and space;
- reduction of the company’s operating costs associated with generating its cash flows.
