The Big Three of Cash Management Essay Example

fixed operational cost.

Here are few of the techniques used by us to pay and stretch out account payable, which in turn allows us to keep a healthy cash flow: •Only one person is in charge of account payables. •Most of our employees are part-time employees. It helps the company with the cost of payroll and health insurance cost. •Payroll is paid bi-weekly.

Bi-weekly payroll helps to reduce administrative cost and give our business more time to use the cash on hand. •Most bills are paid within 45 days after receiving the invoice. All the invoices are carefully file according due date •Payments to our creditors are very consistent. Inventory In most cases the inventory needed for a service type of business can be low.

This represents a great advantage to our business since we do not have to tie up cash. The type of inventory needed in our business is school supplies, cleaning supplies, and food. The way we handle these items are follow: •School supplies are bought once a year. Our centers charge a yearly registration fee to pay for these items.

Therefore our cash on hand is never used. We allow a certain amount of money throughout the year to buy any schools supplies that either run out, or for special activities.

•Cleaning and food supplies are bought bi-weekly. This way we only buy the items needed in a two week period, freeing storage space and the company’s cash. These simple but very effective techniques have helped our business to be successful for the past 10 years. Managing the “big three” wisely has become part of our business model.