Adequate cash management within companies = short-term liquidity

In every production unit it is necessary to maintain an adequate level of liquidity, that is, to have the ability to meet its own expenses, as well as having the feasibility of payment of all its short-term commitments. All this depends on the availability or not of cash, either by generating the same process, or converting current assets into cash (temporary investments, accounts receivable, inventories), or ultimately requesting loans from financial institutions.

We are talking about the income that the organization perceives, which constitute the most important resources that every company has, so its administration must be correct and with a high degree of efficiency, which allows an adequate and effective operation, since of In this way, the company could make investments, acquire raw materials, pay payroll, pay liabilities, buy assets, among others. For this, companies must manage their income, controlling and allocating money resources correctly. Hence, companies require quality information, which allows them to identify the way in which the money was generated, as well as the destination that was given to it.

In addition, it is important to determine in advance how these flows are expected to occur in the future, which implies identifying the sources and amounts that will generate money in a forthcoming period, as well as the application that will be made of that money generated. .

By virtue of the foregoing, we can express that, the production units make use of the control of their income, knowing that this can be defined as: those administrative measures that admit permanent consistency in the treatment of all the operations that generate cash, both in box, as in a bank, in order to reveal the veracity of its results.
In this sense, it is recommended that the measures in the control of available disposable assets, also known as current assets, should be harmonized, in their complexity, according to the nature, operational volume and importance of the company.

Likewise, the relevance of the internal control of economic (monetary) income, or administrative control, is to favor the reduction of errors, the risk of loss and the attainment of fluency in its management. Likewise, it affects the accuracy and veracity of the records, information and financial forecasts. In addition to being a tool to avoid fraud and encourage compliance with the rules and policies of the company. Administrative control covers the organization plan and the set of methods and measures adapted within an entity to safeguard its resources, its financial and administrative information.

recommendations

Effective internal control over cash management can be achieved through a separation of functions, so that the assigned activities are supervised from the beginning to the end, facilitating the efficiency of them.

Promote actions that stimulate the participation of teamwork, establishing delegations and enforce each of its objectives in terms of internal control of cash.

Develop plans where performance was evaluated, which allows to conceive the deficiencies on internal control, in terms of cash management. This allows to reinforce, or to train the personnel about the topic.