# Management of Cash
Cash management is a key function of the finance manager. It is concerned with managing:
- Cash flows into and out of the firm;
- Cash flows within the firm; and
- Cash balances held at a point in time — by financing any deficit or investing any surplus.
## Objectives of cash management
- Provide adequate cash to each unit as per its requirements.
- Ensure no funds are blocked in idle cash.
- Invest surplus cash (if any) to maximise returns.
> A cash management scheme is a delicate balance between liquidity and cost — enough cash to stay liquid, but not so much that it costs the firm in foregone returns.
## The three motives for holding cash (Lord Keynes)
Keynes (a British economist) identified three reasons a firm holds cash/liquidity:
| Motive | Why cash is held |
|---|---|
| Transaction need | To meet day-to-day expenses and debt payments. |
| Speculative need | To grab profitable opportunities that may suddenly appear and would be lost without ready cash. |
| Precautionary need | As a safety buffer against unexpected events. |
## Quick recall
Three motives = T-S-P: Transaction (routine), Speculative (opportunity), Precautionary (safety).