Contents of cash flow management
Cash flow management refers to a management system that takes cash flow as the management center and gives consideration to income, and is established around the business activities, investment activities and fund-raising activities of enterprises. It is the prediction and planning, execution and control, information transmission and reporting, analysis and evaluation of cash flow at present or in a certain future period. Therefore, the specific content of cash flow management not only includes a series of systems, the program arrangement related to the division of labor organization system of cash budget, the forecasting and planning system for its implementation, and the execution and control system consisting of the accounts collection system, the accounts payment system and the scheduling system, but also is an information and reporting system for reporting the final result of the comprehensive operation of the parent system and subsystems at the end of a certain period, and an analysis and evaluation system for the cash flow management system, cash budget execution and cash flow information itself. Therefore, cash flow management is an extremely rich system.
Significance of cash flow management
1. The reflection of cash flow can enhance the effectiveness of enterprise decision-making.
Cash flow is measured according to the cash basis principle, which is consistent with the actual capital movement. Because there are many human factors in the profit calculated under accrual basis, the accounting information reflected has certain limitations, so it is more effective for enterprises to reflect their actual payment ability, debt repayment ability and capital turnover ability by using cash flow information.
2. The use of cash flow is more conducive to strengthening financial control.
The management process of an enterprise is essentially a process from cash to material and from material to cash. Through the management of cash flow, the cash flow of enterprises is under monitoring, which is conducive to putting an end to the disadvantages such as cardiopulmonary bypass, controlling the inflow and outflow of cash and strengthening financial monitoring.
3. The cash flow can better reflect the sustainable operation ability of the enterprise.
The main threats to the survival of enterprises come from two aspects: first, long-term losses, making ends meet. Second, assets are insolvent and unable to repay debts due. It can be seen that the direct cause of the rise and fall of enterprises is not profit, but cash flow.
The position of cash flow management in enterprise financial management
There are still many different views on the position of cash flow management in modern enterprise financial management in China's financial theory circle. Professor Yu, a financial expert in China, believes that the object of modern enterprise financial management is capital movement. As the dynamic expression of enterprise capital movement, cash flow can comprehensively reflect the main process (supply, production and sales) and main aspects (financing, financing and investment; The occurrence of costs and expenses; Profit distribution, etc. )? . Professor Hu of Jinan University believes that the object of financial management is cash flow itself (to distinguish it from cash flow information as the object of management accounting). In his view, financial management is essentially the arrangement of cash flow (including cash inflow and cash outflow) of enterprises? . Professor Wang Bin of Beijing Business School thinks? Is cash flow theory the essential description of financial management object? ,? Is cash flow theory the guidance of enterprise financial management process? .
When understanding the position of cash flow and its management in modern enterprise financial management, first of all, don't confuse money with cash, because cash management is only to manage the cash assets of enterprises, and the object of cash flow management is not limited to cash assets, but should be the whole capital movement of enterprises, involving all aspects of enterprises, and cash management is only a part of cash flow management. From its static form, on the one hand, funds occupy all kinds of current assets and long-term assets (not just cash), on the other hand, they are the sources of liabilities and owners' equity; From its dynamic performance, capital circulation and turnover begin with cash, and finally turn into cash through non-cash forms such as reserve funds, production funds, finished goods funds and settlement funds. Obviously, it is too reluctant to summarize this process in cash.
In addition, cash flow management is the comprehensive management of enterprises, which involves both specific management and many abstract aspects, such as value evaluation and investment decision-making. The way for enterprises to obtain the required funds is not only to rely on cash inflow, but also to obtain the credit provided by suppliers, and to obtain the ownership or use right of assets by means of financial leasing and operating leasing. Similarly, the use of funds by enterprises is not the only way to cash out, and giving customers credit is also one of the ways. These situations show that there is a big difference between funds and cash. Of course, capital turnover is essentially based on cash turnover. Obtaining the necessary cash inflow is the basic premise of organizing production and business activities. Consuming a certain amount of cash is the normal need of the company's operation. Recovering the final reward expressed by net cash flow is not only the purpose of production and operation, but also the starting point of the new capital cycle stage. All kinds of non-cash assets (that is, some funds) are actually the cumulative carriers of cash outflows, and they will eventually be converted into cash inflows.
Therefore, the smooth cash flow is the main content of the company's smooth cash flow, and enterprises that attach importance to cash flow management will certainly be able to operate on a reasonable track. The difficulty of capital turnover is basically stagnant cash flow and insufficient cash position. ? The monitoring and management of cash/capital flow is the core of financial management? This represents the western financial theorists' understanding of the relationship between capital and cash and its position in financial management. To sum up, capital movement is the object of modern enterprise financial management, cash flow is the essence of capital movement, and cash flow management is the core of modern enterprise financial management.
With the in-depth development of market economy and the transformation of enterprise management mechanism, the ability of enterprise to use funds has become a bottleneck restricting the development of enterprises.
1. At present, the enterprise's desire for economies of scale, the inherent impulse to improve its position in the market and the business strategy to achieve long-term development goals all have a huge demand for cash. Because economies of scale have the characteristics of maximizing profits by reducing costs and other measures, it has great temptation to enterprises, and the premise of achieving this goal is to increase investment. Increasing investment related to sales may pose a lasting threat to cash flow, because it always restricts the cash reserves of enterprises. Enterprises that increase investment usually find that their cash outflow will increase rapidly and their net cash flow will drop sharply.
2. The development of the market where the enterprise is located and its position in the market also directly affect the cash flow of the enterprise. Research shows that in a slow-growing market, the cash flow obtained by enterprises is directly proportional to their market share. The enterprise with the largest market share has the largest cash inflow. In the fast-growing market, the enterprise with the highest market share has the lowest net cash flow, just like the enterprise with the lowest market share. It goes without saying that enterprises with low market share have low cash flow. In such a market, an enterprise with a high market share may need a considerable amount of cash just to maintain its original market share in order to prepare for additional working capital, factories and equipment. Enterprises will face the impact of rising costs in the short term if they want to get rid of market difficulties and improve their future market position by increasing promotional expenses or launching new products.
3. In order to gain competitive advantage and improve competitiveness in the fierce market competition, enterprises usually implement differentiation strategy and target aggregation strategy. However, before these strategies work, a lot of money must be invested. In fact, enterprises not only implement differentiation strategy and target aggregation strategy, but also use cost leadership strategy, which is also facing the risk of short-term expenditure increase, because the cost leadership strategy pursues the establishment of long-term cost advantage.
It can be seen that cash flow is always a scarce resource that restricts the development of enterprises. Accordingly, as a professional management, financial management must pay attention to cash flow management. Now, in order to support the development of enterprises, all countries in the world have created a good environment for their external financing by formulating policies and establishing intermediaries, which conforms to the scientific cash flow management within enterprises and greatly relieves the demand for funds by enterprises. In contrast, our government's support policies for enterprises are still insufficient, and the creation of external financing environment is still in the process of exploration. In this situation, the financial management of enterprises can only focus on cash flow, build a scientific cash flow management system, increase the intensity of cash flow management, and take this as the origin to radiate and extend to other fields of financial management. Solve the problem of urgently needed funds for enterprise development.
Five key points of cash flow management
Cash flow management is a comprehensive and systematic management activity, which consists of three systems: organization system, operation system and supervision system. To realize cash flow management, we must grasp five points:
1. Maximize enterprise value as the ultimate goal. The goal of enterprise financial management is to maximize enterprise value. As an important part of financial management, cash flow management must follow the principle of value creation orientation when making relevant decisions.
2. Comprehensive use of various management methods. Management tools usually include forecasting, decision-making, budgeting, control, analysis, etc. In cash flow management, enterprises must comprehensively use the above means to make overall arrangements for their own business activities, investment activities and fund-raising activities in order to achieve the goal of maximizing enterprise value.
3. Run through management activities. The content of enterprise financial management can generally be summarized as capital and its cycle, including financing, investment and profit distribution. Whether it is financing, investment or profit distribution, cash is the starting point and end point of enterprise capital cycle, so cash flow management should run through the whole process of enterprise business activities.
4. Fully consider the risk factors. The inflow and outflow of cash are influenced by many factors and have great uncertainty. Cash flow management should not only pay attention to the quantity of cash flow, but also consider the time distribution of cash flow (the principle of time value of money) and the uncertainty of cash flow (risk management).
5. Take the system as the guarantee. No matter how good the management model is, it can only be effective if it is implemented in the system. It is necessary to define the responsible personnel, workflow, work requirements and reward and punishment measures in all aspects of cash flow management through the system, and form a set of systems with clear responsibilities, standardized management and strong constraints.
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