Question

Effects of cashflow management practices on the perfomance of Small and Medium Enterprises (SMEs)?

Answer 1

Answer: Cash flow management is the system of managing the cash in the business so that company can have good availability of cash for day to day operations, for investment and for financing the assets and business. Cash flow management is very important because cash is a crucial aspect of business.

Cash flow management ensures the net amount of cash in the business should be a positive figure not a negative one. A good cash flow management makes the cash available all the time in small and medium enterprises. 80% small businesses fail due to poor cash flow management. As the blood flow is necessary in body same the cash flow. Effective cash flow management saves the SMEs from getting insolvent.

A healthy cash flow position creates liquidity for the SMEs. This creates handsome profit for the SMEs. Higher profits lead to the growth and expansion of SMEs.