Cash Flow Management SAP VS Microsoft - Coursework Example

Background of project Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time. Cash flow can be used in many ways. The situations that it can be used in for example include calculating parameters where cash flow discloses cash movements over the period that is examined in the study. Cash flow in a business mainly entails the movement of funds in and out of a business through the activities that the finances are used in and the inflow through factors such as sales (Bodie, Zane, Alex and Marcus, 2004). This information obtained about the inflows of money and resources should be tracked on a weekly, monthly or quarterly basis to enable identification where a business is presently from a financial position and where it will be several months to come in the future. When it comes to the basics of cash flow one should know there are two types of cash flow: positive and negative. Positive cash flow defines the situation in which the cash coming into the business is more than the amount of cash leaving through expenses, salaries and accounts payable (Dussauge, Hart and Ramanantsoa, 2002). On the other hand, negative cash flow in a business means that the amount of cash going out of the business is greater than that incoming in the business. One thing that’s not for certain is positive cash flow. Companies have to work very hard at it and manage cash effectively to control the inflow and outflow of funding. Selected business management Selected business environment is restaurant. In management of cash in a restaurant, the most important aspect is ability to understand the cash flow of the environment. Cash flow management in restaurants is mainly indicated as the amount of cash that come into the business and amount that leaves the business. This is done in monthly, weekly, yearly and daily basis. When the business is not able to understand this aspect of cash flow management, there is the risk of the business having a financial crisis. In management there should be no relying on the credit that is obtained from suppliers (Bodie, Zane, Alex and Marcus, 2004). Other cash flow management techniques that are used in the business include keeping track on all the flows of cash, keeping inventory low to keep cash flow high and been keen on the deposits that are made by customers. Cash flow management in SAP This management option supports an organization in tracking and optimization of cash flows and keeping records and controls on payments, receivables, payables and liquidity. Automation that is involved in the process increases the speed of collecting receivables and also analytical function assessing. The design mainly helps an organization to have enough financial resources so that the resources are available at all times. Cash flow management in SAP is relevant in payables and receivables, management of payments and management of liquidity, management of taxes, travel and expenses. There are several importance and benefits that are obtained from the use of this method in management of a business. All business that uses this technique is connected to a financial area. The data that a business uses is able to flow automatically from the business. Data flows automatically on financial activities such as payables and receivables processing and to accounting activities such as inventory accounting. This deep integration enables innovative functions for automating revenue recognition as well as for forecasting and analyzing profitability (Dussauge, Hart and Ramanantsoa, 2002). Another benefit of using the system is that there is better control over payments, receivables, liquidity and receivables. Management of liquidity through the use of SAP enables a business to optimize on the working capital. The business is able to access cash position that they are in good time, identify issues that are critical to them and generate new tax for financial personnel who are responsible for addressing the issues (Bodie, Zane, Alex and Marcus, 2004). This results in shortened cash cycles. The software can also help a business optimize the payment processes by taking advantage of early payment discounts that may reduce cash flow in the short term but ultimately save money of the company and contribute directly to the bottom line. The system enables close collaboration with business partners who are along the supply chain. Through the system, there is cutting down of costs and faster reaction to changes that occur in the business. The system contain comprehensive integrated functions which enables it to perform functions such as payment reminders, payment advices, and electronic bank transfers or statements enables you to streamline and accelerate the financial operations (Bodie, Zane, Alex and Marcus, 2004). SAP business by design provides the holistic and flexible collaboration functionality need to flawlessly connect and communicate with the business environment for instance, with banks, clearing houses, authorities concerned with tax, and lockbox suppliers. In the system, it should be noted that when Cash Flow Management is not started the main data of for example tax authorities, banks or payment houses can also be included in the Business Partner Data work center. The use of the system is also advantageous as when it is activated; employees are able to perform fast their work resulting to increase in productivity. SAP Business by Design enables the business to power routine tasks when there is possibility. For example, the software on its own supports compensation, dunning, and the process of payment. When exceptions exist, SAP Business by Design automatically alerts the accountable employee and sometimes bring out suggestions or additional functions; for example, during the clearing process the software proactively provides potential matches of open items and incoming payments. Cash flow management through Microsoft Cash flow management through Microsoft can be used to predefine an opening balance for a forecast, based on a single cash management transaction or a specific General Ledger account balance. A business or company also can base an estimate on one or more checkbooks balances by or without work and correct transactions, such as credits, payments, and reconciliation changes that are not to be included in checkbook balance. The system is installed automatically when there is installation of Microsoft dynamics. In installation, there is consideration of registration keys that are required. The management system can be used to complete several activities. The activities the activities that can be completed in the system include creation of unlimited number of cash flow forecast definitions, forecasting cash flows to the business in many ways, creating situations without actual recording transactions, summarizing daily inflows and outflows of cash that a business has in their calendar window and viewing of the summary of any given cash inflows and outflows of a day. The system can also be used in obtaining detailed weekly and monthly calendar reports of a business. There are several benefits that are associated to the system. Creation of cash flows definition in the system is unlimited and the creations that have been made are displayed in cash flow calendar and cash flow explorer. Comparison and contrast on Cash flow management in SAP and Cash flow management through Microsoft Cash flow management in SAP supports an organization in tracking and optimization of cash flows and keeping records and controls on payments, receivables, payables and liquidity. Automation that is involved in the process increases the speed of collecting receivables and also analytical function assessing while Cash flow management through Microsoft can is used to predefine an opening balance for a forecast, based on a single cash management transaction or a specific General Ledger account balance. Cash flow management in SAP is relevant in payables and receivables, management of payments and management of liquidity, management of taxes, travel and expenses while is relevant in creation of unlimited number of cash flow forecast definitions, forecasting cash flows to the business in many ways, creating situations without actual recording transactions, summarizing daily inflows and outflows of cash that a business has in their calendar window and viewing of the summary of any given cash inflows and outflows of a day. Both the methods however are relevant in keeping records in activities that are carried out in a business. The records that are kept by both the systems ensure that there is finance security in businesses and that there is enough finance that is needed in operation of the businesses. Consideration by managers There are objectives that are formed in a business that need to be considered in choosing a cash flow system. Objectives of cash flow management include acceleration of cash flows when there is need and possibility, delaying cash outflows until the time that they become due, maintaining the level of cash in the business such that it is not excess not deficient to enable carrying out of operations, investing surplus cash to earn a rate of return and borrowing of cash at the best possible terms. One of the objectives of cash flow management is to hold the right amount of cash (Chopra and Meindl, 2007). If a business decides to hold too much cash, the business is able to lose the opportunity to earn a return on idle cash. If the business holds too little cash, it runs the risk of not making timely payments to suppliers, banks, and other parties. Through this, through the different cash flow management, there is need to consider the amount needed in the transaction of the business. The management would like to have an optimal cash balance that is neither excessive nor deficient. One of the best ways to determine the optimal cash balance by management is to fully understand cash flow patterns. This requires that the management plot cash flows and prepare a forecast. A cash flow forecast gives the management a detail projection of future cash inflows and outflows (Chopra and Meindl, 2007). This will help avoid cash deficiencies as well as excessive cash balances. Other factors that are also considered in cash flow management are the long term and short term financial needs. Conclusion When it comes to small businesses, staying on top of cash flow management is a difficult thing. In the event of cash glow deficit companies have a number of finance options to work through difficult times until deposits start to come in. For example, apply for a loan from banking institution or individual, apply for a line of credit from a banking institution, liquidate assets, and delay payments to vendors. Cash flow management in SAP supports an organization in tracking and optimization of cash flows and keeping records and controls on payments, receivables, payables and liquidity. Automation that is involved in the process increases the speed of collecting receivables and also analytical function assessing. References Bodie, Zane; Alex Kane and Alan J. Marcus (2004). Essentials of Investments, 5th ed. McGraw-Hill Irwin. pp. 455. ISBN 0072510773. Epstein, Barry J.; Eva K. Jermakowicz (2007). Interpretation and Application of International Financial Reporting Standards. John Wiley & Sons. pp. 91–97. ISBN 9780471798231. Chopra, S. and Meindl, P. (2007). Cash flow management. Upper Saddle River, N.J.: Pearson Prentice Hall. Dussauge, P., Hart, S. and Ramanantsoa, B. (2002). Cash flow management. Chichester: Wiley. Read More