Management of the Cash Position

MANAGEMENT OF THE CASH POSITION by Bernie J. Grablowsky Modem cash management methods, especially those usually presented in college textbooks and classrooms, are generally neither understood by most small-business managers nor applicable to the vast majority of their businesses. Not only do these managers often have difficulty in comprehending sophisticated forecasting techniques, but the cash flows of their companies are usually dependent upon fewer customers and a smaller number of product lines than those of their larger competitors. Thus the cash flow pattern of the small firm is typically too unstable over time and the available data describing it too limited for reliable forecasting. The small business is subject to still other constraints, apart from those applicable to all firms, which tend to restrict the use of even relatively simple cash management techniques. Small firms, for example, are normally unable to afford the division of talent available to larger companies in the form of highly educated financial managers. Many small firms, struggling hard just to remain solvent and earn a fair return, suffer further from lack of recognition that a cash management problem even exists. Once a problem is discovered the manager may lack knowledge of the methods available for a viable solution. A solution which requires more manpower or expenditures than can be covered out of normal cash flow is
Dr. Grablowsky is assistant professor and rhairman of the Department of Finance at Oid Dominion University. He has published articles in the JSBM, the Journal of Financial Education, and the Journal of Behavioral Economics. Prior to his entry into education. Dr. Grablowsky was with the Department of Cost, Planning, Systems, and Analysis at the Monsanto Co., World Head, quarters, St. Louis.

typically rejected by the small business.' This article will present the results of a survey of small-business cashmanagement practices and compare these methods with techniques