Cash

You need money to make money – this is obvious. That’s why you need cash. Actually, you need cash in your bank accounts for two reasons. First, for investments. In a financial value – focused paradigm that this guide is based on, all corporate objects are investments and all projects are investment projects.

Therefore, every corporate asset is an investment and so must be every expense. In fact, in this paradigm there is no such thing as an expense at all – there are only investments that produce acceptable NPV and IRR and waste, which does not. The latter, obviously, must be eliminated.

Therefore, the key objectives of your CBA project (which is, in itself, also an investment project) are to (1) identify and eliminate all waste – objects, expenses, projects, etc. and (2) maximize NPV and IRR on all investments. This is how you make possible to make the quantum leap in your aggregate corporate performance and to transform your company into a powerful and lean money-making machine.

The second function of your cash is your liquidity cushion. You must be sure that you always have enough cash on hand to pay your bills. At the same time, you must make sure that you have the absolute necessary minimum amount of cash in your accounts, because cash sitting idle in your bank account, brings totally inacceptable returns.

To identify and maintain this optimal amount, you will need (1) optimal and highly efficient methodology for optimizing your cash position; (2) a highly efficient business process based on this methodology and (3) a highly experienced and competent cash manager which is typically one of your financial managers. Although some commercial banks do offer some cash position optimization services.