Guide to Cash Management : How to Avoid a Business Credit Crunch

Effective cash management advice to help boost profitability and fend off risk Cash, not profit, has always been the ultimate determinant of whether a business survives, and the current credit crunch has highlighted to businesses the importance of cash management. Firms that ran short on cash discovered this firsthand during the financial crisis, running into serious financial trouble or even going bust. Guide to Cash Management: How to Avoid a Business Credit Crunch is the invaluable guide for any business that wants to avoid running into its own credit crunch and stay fiscally sound. Written in a concise yet accessible manner, the book clearly explains the six critical aspects of the effective management of cash and cash flow, including: Forecasting likely cash receipts and payments Establishing funding lines necessary to cover asset purchases or for working capital Efficiently managing day-to-day operations with regard to the amount of cash required Selecting appropriate investment opportunities that result in positive cash flow Monitoring the profitability of products and services to ensure they are cash generative and not cash destroying Having a plan for managing excess cash that exceeds demand Essential reading for intelligent business professionals and investors, Guide to Cash Management is designed to help firms improve their profitability and reduce risks.

John Tennent, a chartered accountant, is managing director of Corporate Edge, a consultancy and training company. He specialises in business modelling and investment appraisal, and is a consultant to a wide range of global companies. He is the author of The Economist Guide to Financial Management and coauthor of The Economist Guide to Business Modelling.

Preface vii

Introduction 1

1 Key concepts 6

2 Cash flow forecasting 19

3 Treasury management 53

4 Working capital efficiency 105

5 Investment opportunities 141

6 Product profitability 165

7 Cash surpluses 174

Glossary 184

Index 193