Cash management
Cash management is not as easy as most people perceive. It is highly sophisticated hence understanding the proper financial tools should complement the other aspect of cash flows. Some refer to cash as the king when it comes to financial management because it is the reason why businesses are done. The precision machine company has presented its cash flow reports and the evidence shows that there is more to be done. The net cash flows are little considering the potential that is held by this company in terms of revenues. In this regard, this paper has recommended on a strategy that will help in maximizing the net income while at the same time cutting down the expenses which is in form of wages, purchases and so on. Several strategies usually collaborate to balance the cash management but the most appropriate for this company would be to manage the payables (Reider & Heyler, 2003).
The rate of growth for the expenses is rising at a faster rate than that of the sales and these calls upon examining the costs carefully so as to control or cut some of them off. In this regard, the Precision machine company should embrace some few but effective practices to curb its situation. First, it should consider its vendor’s offers that are usually made for early payments, use integrated methods of data storage to reduce the risk of erring and embrace regular communications with the supplier. This will keep him informed of any delays and other aspects that require trust and understanding (Reider & Heyler, 2003).
In addition, the company should consider planning, budgeting and monitoring the cash flows to ensure that the expenses are not surpassing the sales. A review of the previous trends of the company’s budget could also assist the current management team to improve from the baseline of the cash flows. The company should also consider choosing the suppliers with the lowest price to make the payments remain flexible. This strategy could relieve the company from the strain of uncontrolled outflows. The resultant net revenue would have increased the net profit hence achieving its cash flow goals (Reider & Heyler, 2003).
Financial planning is dependent on numerous factors among them being categorized as market forces while others as economic factors. Marketing forces are those that are dependent of the nature of the market in terms of the customers and the position of the customers. Among the market forces, the nature of the customer needs is a considerable factor for this company. The greatest task for any company is to identify the needs of the customer so as to provide that which aligns with their expectations. Next is the presence of new competitions. This usually occurs when companies merge or get into an acquisition. In general, the market forces will attribute to the pricing changes hence cause a corresponding change in the cash flows. This has an impact on the financial planning of a company (Reider & Heyler, 2003).
Some of the economic factors include inflation and changes of the rates of interest. Variations of exchange rates which are usually caused by global economic fluctuations have a direct influence on the financial planning of a company. The rates of interest would affect the company if it had purposed to borrow a loan for its funding. If the rates are high, the planners will be forced to budget more into the interest rates and otherwise to the vice versa (Reider & Heyler, 2003).
Reference
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Reider, R., & Heyler, P. B. (2003). Managing cash flow: An operational focus. Hoboken, N.J: Wiley.
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