Introduction to Cash Management

Cash management is the collection, investment, and disbursement of cash flows while maintaining the liquidity of the organization. It is the management of cash flows from the operating, investing, and financing activities of a company. The objective is to avoid the risk of insolvency and improve the financial position of the firm.

Cash Management is also known as Treasury Management.

Financial instruments included in cash management are treasury bills, money market funds and certificates of deposit, etc.

Chief Financial Officers (CFOs), business managers, and corporate treasurers are responsible for cash related strategy formulations and stability analysis. They monitor and analyze key metrics daily, monthly, quarterly, and annually. Cash Management can also be outsourced.

The cash flow statement is the main component of cash flow management. It is recorded daily and reported quarterly to the stakeholders. It includes accounts receivable, accounts payable, investments, and financial records. The end of the statement reveals how much cash a company has available on-hand.

The statement is divided into three parts:

• Investments

• Financial activities

• Operating activities

If the net change in working capital (WC) is positive, the current assets of the organization surpass the current liabilities and vice versa. If the net change in WC is negative there is also less liquidity available.

Bad capital investments, lack of cash management skills, and poor understanding of the cash flow cycle can be some of the reasons businesses fail at cash management.

Some of the tools of Cash Management are:

1. PlanGuru

2. Float

3. Scoro

4. QuickBooks

5. Pulse

6. CashAnalytics

7. Google Docs

8. Concur

9. Cushion

10. Thrive

Cash Management Services/Solutions

Banks are the primary financial service providers. There are various cash management solutions available in the market for individuals and companies who are looking for a good return on their cash and liquid assets like:

• Point of Sale Solutions

• Receivables Management

• Payables Management

Meaning of Digital Cash Management

Digital Cash Management can be defined as an electronic system that allows storage, transfer, and disbursement of e-cash. It is becoming more common because of the convenience and independence it offers.

Digital Cash Management aims at creating a digital ecosystem through seamless connectivity for the exchange of financial information and swiftly carrying out transactions.

As a service, it is provided by banks using outsourcing. Individuals invest their money into a bank that is comparatively easy to use, secure, and possesses advanced security features.

Going digital can ensure greater transparency, lower risk of fraud, improved security and data storage, optimized payments, and simplified monitoring of subsidiaries because of standardized processes, etc.

Importance of Digital Cash Management

One of the most important parameters for the evaluation of a business is cash. It is required to manage functions like payment of rent, salaries, utility bills, and various other daily expenses.

1. Liquidity

Businesses can get a real-time view of account balances and transactions. It gives them an idea about their income, expenses, savings, and investments. Keeping track manually can be exhausting. But having accurate details can make it easy for the business to assess its current liquidity ratio.

2. Prevention of Fraudulent Activities

With cash management solutions every transaction is recorded in detail and checked for discrepancies. It helps in monitoring fraud, behavior analytics, and user management. As the number of transactions increases, chances of fraud increase. With digitalization, any deviation in a transaction can be immediately flagged down.

3. Cost-Effective

With the implementation of digital cash management, the need for human resources and infrastructural electronic systems has reduced greatly. It decreases overall operating costs. It saves time, increases efficiency, increases return on investment, and profitability grows.

Cloud banking, process automation, and paperless transactions help in carrying out cash transactions trouble-free.

4. Beyond Conventional Cash Management

Digital cash management services improve working capital and add automation. They also help in analyzing and cash flow forecasts. It is not restricted to processing receivables and payables only.

5. Customer Satisfaction

With the increasing availability of cheaper internet services, customers can perform their financial transactions on smart devices. It saves time and money. Customer engagement with logical advice gives customer satisfaction. Sometimes, this leads to customer loyalty.

Besides, management of working capital, guaranteed future solutions, handling unorganized costs, and virtual bank accounts, etc. help in improving overall efficiency.

Advantages of Digital Cash Management

1. Access to real-time transactions and investment-related information regardless of location

2. Cost efficiency and cost savings

3. Long-distance transactions are much easier since it’s digital money

4. Reduced risks of loss and theft in the cash-handling process due to automation

5. Visibility of cash and data can facilitate better decision-making. It allows businesses to effectively manage their operations.

6. No more downtime with advanced monitoring and diagnostics.

7. Solutions can be customized to cater to the need of the business

8. Safer than traditional methods because of secured gateways

9. Details of receivables and payables are stored in databases. They are easily traceable hence it avoids confusion and provides clarity.

10. More payment options lead to faster payments improving the cash flow.

11. By using digital cash one can avoid transaction fees and withdraw or send money without a hassle.

12. A greater sense of trust

13. Expansion of business since it’s easier to do business internationally.

The business can concentrate on its core competencies rather than struggling with daily financial transactions.

Disadvantages of Digital Cash Management

1. Forgery and hacking are some of the biggest cons of digitized financing. However, by using advanced technology and tools for data encryption and security, these can be averted to a great extent.

2. Understanding and influencing customer behavior is a tough job online. But, various social media tools can be leveraged to attract customers.

3. DCM uses the internet which provides anonymity in turn making few things untraceable. It is a problem for the government and legal authorities.

4. In commercial spaces, banks lack tools and technologies to document, track, and ensure compliance with service contracts and agreements.


Companies can regularly monitor and analyze liquidity and solvency ratios with digital cash management. These ratios are important from an external stakeholder’s point of view. It is useful for analysis purposes.

These new-age solutions are progressive and yield high-end functionality and utility. This enhances agility and effectiveness. It provides transparency in business. It helps with informed decision making and to drive business performance forward. The transactions are quick, safe, and effective. Although Digital Cash Management is a relatively new system, it is widely adopted because of these reasons.