CAT / FIA FFM Syllabus B. Cash Budgeting - Importance of cash flow management - Notes ^{2 / 7}

Planning, tracking and collecting cash are all important because cash PAYS THE BILLS.

• The failure to pay bills puts a company in danger of bankruptcy.

• What begins as a condition of illiquidity can evolve into insolvency.

Having enough cash on hand is therefore critical in being able to settle obligations when they fall due, however, holding too much cash in a business is costly.