How the inflow and outflow of cash is linked to the operating cycles of the business? Learn the cash management process in an enterprize and it's key components.
The cash flow timeline includes the total time interval beginning with the first phase of the operating cycle, when resources are purchased, until the last step when receipts are collected.
It consists of 4 basic steps.
1. Material purchases.
Acquisition of raw materials or merchandise for resale includes negotiation of the method of payment, credit terms and trade and payment discounts.
2. Payment for resources.
All resources required to support sales, including labor, marketing and overhead expenses, incur financing costs until cash is collected for sales made.
3. Sale of inventory or services.
Merchandise and other sales are most frequently accomplished by extending credit to customers. The timing of accounts receivable collection is a major focus in cash management.
4. Collection of receipts.
Only when the customer has provided good funds for the merchandise or service does the cash flow cycle conclude for that transaction.
Suspense and clearing accounts resemble each other in many respects but there exists important fundamental difference between the two. Read more to explore these differences.
Cash Management - Integrations
Cash Management integrates cash transactions from various sources like Receivables, Payables, Treasury and creates reconciliation accounting entries after matching transactions with Bank Statements.
In the previous article we talked about the meaning of the account reconciliations. Now as you now the definition of account reconciliation, in this article let us see why it is carried out.
Introduction to Bank Reconciliation Process
These set of articles provide a brief introduction to Bank Reconciliation Process. This topic not only discusses the meaning of bank reconciliation process but also discusses how this process in handled in new age ERPs and Automated Reconciliation Systems.
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Till reconciliation happens the amounts are parked in 'Cash Clearing Account'.
Complete Bank Reconciliation Process
Bank Reconciliation Process is a eight step process starting from uploading the Bank Statement to finally posting the entries in General Ledger. Learn the Eight Steps in Detail!
Disbursement Float is the time taken from payment creation to settlement. Collection float is the sum total of time taken by Payment Float; Mail Float; Processing Float and Availability Float. Learn more!
The terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger and includes funding and investment activities as well. Learn all about Treasury Management here!
Have you ever wondered what is actually a Bank Statement and why it is needed. What is the information that is available in a bank statement?
© 2023 TechnoFunc, All Rights Reserved