cash management
The process of collecting and directing cash to maintain liquidity and optimise financial position.
Example
“Good cash management meant bills were always paid before discretionary spending.”
Memory Tip
MANAGE your CASH — actively directing where money sits and flows.
Why It Matters
Cash management helps you ensure you always have enough money available for bills and emergencies while making sure your extra funds earn returns through savings or investments. Without proper cash management, you might miss payment deadlines, incur overdraft fees, or leave money sitting idle in low-interest accounts when it could be working harder for you.
Common Misconception
Many people believe that cash management only means keeping as much money as possible in savings accounts or under the mattress. In reality, effective cash management balances the need for accessible funds with the opportunity to invest or earn interest, recognizing that some money should be readily available while other portions can be deployed for growth.
In Practice
Suppose you receive a monthly salary of 3000 dollars and have regular expenses of 2200 dollars plus an upcoming car insurance payment of 600 dollars. Smart cash management means keeping 800 dollars in a liquid checking account for immediate expenses, setting aside 600 dollars in an accessible savings account for the insurance bill, and investing the remaining 400 dollars in a high-yield savings account or short-term investment to earn interest while still being available within a few days if needed.
Etymology
From Old Norse 'kassa' meaning money box plus Old Italian 'maneggiare' meaning to handle.
Common Misspellings
Build a budget and track your spending
Related Terms
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See Also
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