Managing cash positions includes forecasting short-term cash flows through (i) minimum cash balances, (ii) identification through data gathering, variance reviews, and final reports; and (iii) using cash forecasting systems.
Managing short term funds can either be done passively or actively. A passive strategy is characterized by one or two decision rules for daily investments, whereas an active strategy involves constant monitoring.
A passive strategy is less aggressive than active ones, places top priority on safety and liquidity, and does not necessarily offer poor returns if companies have reliable cash forecasts. When companies manage short term funds, they should integrate investment policies for guidelines. They should not be lengthy and should be understood by their (i) Purpose, (ii) Authorities, (iii) Limitations/Restrictions, and (iv) Quality.
For more on Working Capital, click the following link: Finance Essentials: Working Capital Management Made Simple