Sir Richard Branson, a business magnate, investor, author and philanthropist has rightly said: “Never take your eyes off the cash flow because it is the lifeblood of business.”

For a layman, when the term “Cash” comes across, he/she interprets it in economic conditions which are the money in the physical form of currency like banknotes and coins. But this has a very different meaning in terms of finance. In financial terms, cash is current assets consisting of money equivalent that can be used immediately or near-immediately.

This mostly includes Bank Accounts and marketable securities such as government bonds and investments. Cash, being the lifeblood of the businesses of all magnitudes, becomes an essential asset and hence is needed to be managed well.

Cash Management refers to collecting, handling and usage of cash; market liquidity, cash flow and investments. It is one of the critical aspects of the financial stability of an organisation. Here is a simple example of why cash management is essential, especially in businesses.