In this article, we will be explaining how essential cash availability is for growing your business. You’ll explore the importance of keeping cash in hand for a growing business. You will also learn about the opportunities you may have for the growth and avail of unique chances. If you want to learn more, we suggest you continue reading this article.
Table of Contents
What is Cash in Business?
The cash basically consists of all the money in the form of bills and fractional coins of legal tender that a company owns. It also includes checks to be deposited in the bank, money orders and other commercial papers known as the means of collection and payment. Since you’re depositing them in the banks, these instruments immediately increase the cash in bank accounts. Unlike business cash advance, this cash in hand is an integral part of the current assets that the company reflects in this section of its balance sheet. It is the most liquid asset that the company owns. The company with the cash it owns faces and liquidates all its obligations.
Cash Flow in Business
The conflict is aggravated when you are not prepared for the worst-case scenario – many companies do not necessarily go bankrupt for losses, but for the lack of ability to resolve cash flow conflicts quickly and correctly. The cash flow of the company informs us of the amount of liquid money an organization has. Another point includes the availability of maintained resources which the company maintains. These resources include immediate availability and liquidity, such as cash and balances in financial institutions.
Cash and cash equivalents (checks, money orders, etc.) are directly associated with money in the form of bills and coins of legal tender. Cash seen as simple money can be characterized as something that has an assigned exchange value, universally recognized and accepted. It is the most liquid asset of the company, it has a universal exchange value. Generally, the money supply is controlled by the monetary policies of the states. The demand for money is controlled by a variety of goods and services available for consumption.
Types of Cash
There are different ways to classify cash:
At your destination:
- Operational: It is the main source or daily income and expenses
- Material Investment: It is the amount of money dedicated to investment and expansion
- Financial: It is the cash that is destined to yield financial benefits, that is, to use the money to earn more money.
Due to its physical location:
- Cash in petty cash: These are the funds deposited in the bank’s cash flow
- Cash in Bank: The funds are deposited and fixed in bank accounts in terms of investment.
Cash in Petty Cash
The inventories of monetary means and securities deposited in the Company’s funds are categorized. It includes cash for minor payments, for changes, fixed funds for specific attentions, cash extracted for payroll payments in places where workers are paid in cash.
Cash in Bank
They are the inventories of the monetary means deposited in the bank accounts or other financial institutions. They comprise all the operations of bank accounts, which include the resources deposited in other entities and financial institutions, without having the character of temporary investments.
Cash Control in Cash
Cash, being the most circulating asset of the company, is also the most coveted for having a universal exchange value. It can be exchangeable for all types of assets and can also be used to pay all kinds of debts.
These actions require control measures of two types:
Physical Security Measures
Those that make up the components and physical requirements are the premises where the funds are located. Among these measures we can mention:
– Establish an iron fence in the customer service window and in the windows it has
– Place an iron fence on the door that communicates with the outside
– Metal door in the window with lock, key or lock
– Access door with key in good condition
– All-access doors will be kept closed every time the cashier leaves the cashier’s premises
– All clients, both external and internal, will be served by the small window, not having direct access to the interior
– At the access door, there must be a visible document with a list of people with access to the inside of the box
– All cash owned by the entity will be stored in the safe
– Whenever possible, have an intruder alarm system and security cameras
– The cashier must be notified of his material responsibility for the custody and custody of the cash.
Operational Safety Measures
It includes all control components in terms of standards, procedures, destinations, and ways of operating cash. In this way, everyone involved in its use and destination knows clearly and explicitly established control mechanisms. These measures include:
– Minutes of funds authorized to remain in cash, where amounts and destinations are expressed for which they will be used
– All income and payments must be documented and must be demonstrated through invoices for purchases, services received, debt collection, etc
– Updated resolution of signature control with the ability to authorize payments for cash operations, whether for minor payments, allowances, issuance of checks, use of stamped and more
– Certificate of material responsibility for the custody of cash and valuable documents
– Resolution showing the frequency with which bank deposits will be made if it is not executed on a daily basis
– Control of Reimbursements of the Fixed Fund
– Control of Advances to Justify.
All these actions, both physical and operational, are also known as Internal Control activities. The aforementioned has a strong multiplier effect. If a company delays the payment of debts and impairs the payment capacity of its creditors, a chain is generated that can be serious financial problems to the most vulnerable. These operations to be carried out by officials of the company and enable them to achieve the reduction of errors. The significant reduction of the risks of losses and the obtaining of fluidity in its management verify the accuracy and veracity of results, financial information, records, and financial forecasts. This helps us avoid fraud and promote the fulfillment of the norms of the codes of ethics of each company.