Cash management and risk management

For business leaders, cash management and risk management are of the utmost importance. This is a concern that is particularly relevant in view of the constant instability of the financial markets and the increasing risk of non-payment. There are therefore some strategies that companies are implementing in order to face these challenges.

Cash management analysis

The cash position shows the money remaining in the bank account after receipts have been received and expenses paid. Cash management is therefore the control of cash inflows and outflows, and the deduction of the final net balance. The cash position can be surplus (positive) or deficit (negative). If it is positive, the income is greater than the expenditure and the balance of the account is in credit so it is useful to analyze an investment formula. And in the opposite case where the bank account is in debit, the best thing to do is to obtain short-term financing from the bank partner or any other action leading to a credit situation. However, one can have a credit account but not have paid certain charges such as a supplier, VAT etc, and vice versa. Thus, as part of good cash management, it is necessary to rely on a cash flow plan or cash flow statement that helps in the management and anticipation of cash flow difficulties and periods of credit passages. It also makes it possible to know the duration and the sum of its debit or credit balance.

Risk management analysis

The increase in financial risks affecting many companies is an undeniable fact. The financial and general management of companies take these risks into consideration and have created risk management practices.

Determining the nature of the risks

The nature of the risks is considerably diversified. However, the main financial risks that companies generally face are related to the economic environment, the market, counterparties, fraud or financing. Apart from this, there is also the securing of liquidity, the control of the impact of volatility on the company's results, etc...

Action to be taken

For any type of risk, a solution can be found to remedy or anticipate it. For example, the introduction of electronic payment systems and electronic signatures is also an effective way of combating the risk of fraud. And against financing risks, factoring is one of the solutions chosen by companies to finance their working capital requirements or the development of their business. This financing solution is appreciated for its flexibility and for its cost, which is more interesting than standard bank financing solutions.

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