Glossary
Cash Flow Management
Cash flow management is the process of monitoring and optimising the timing and volume of cash entering and leaving a business. Cash flow forecasting predicts future positions; cash flow management acts on those predictions. It’s the set of short-term decisions that keep a business liquid enough to operate.
What It Is
Revenue and profit are essential metrics. But cash is what pays the bills. A business can be growing, booked with orders, and reporting strong profit, yet still fail if it runs out of money before customers pay.
Cash flow management connects the operational reality of when cash arrives and leaves with the financial decisions needed to bridge gaps and deploy surpluses.
For businesses using supply chain finance, cash flow management is the operational side of working capital strategy, the day-to-day activity that keeps the cash conversion cycle moving.
Operating vs. Strategic Cash Flow Management
Timeframe: daily to 13 weeks; strategic: 3 months to 3 years.
Owner: treasury manager, AP/AR teams; strategic: CFO, finance leadership.
Focus: ensuring daily liquidity; strategic: optimising capital structure.
Tools: SCF programmes, overdraft, receivables financing; strategic: working capital facilities, equity, long-term debt.
Key metric: daily cash balance, 13-week forecast accuracy; strategic: free cash flow, working capital ratio, CCC.
The Cash Flow Statement
The cash flow statement records when cash moves. It’s divided into three sections:
Operating Cash Flow. Cash generated from or used in the core business: customer receipts minus supplier payments, payroll, and operating expenses. This section captures working capital activity.
Investing Cash Flow. Cash spent on or received from long-term assets: capital expenditure, asset sales, and investments.
Financing Cash Flow. Cash from borrowing, loan repayments, equity raises, and dividend payments, including SCF programme settlements.