# Management of Cash
Cash management is an important function of the finance manager, 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 — financing deficits or investing surplus.
## Objectives
- Provide adequate cash to each unit as required;
- Ensure no funds are blocked in idle cash; and
- Invest any surplus cash to maximise returns.
A cash management scheme is therefore a delicate balance between liquidity and cost.
## Keynes' Three Motives for Holding Cash
(Lord Keynes, British economist)
| Motive | Reason for holding cash |
|---|---|
| Transaction need | To meet day-to-day expenses and debt payments |
| Speculative need | To take advantage of profitable opportunities that may arise (and would be lost for want of ready cash) |
| Precautionary need | To provide safety against unexpected events |
## Cash Budget
The cash budget is the most significant device to plan for and control cash receipts and payments.
On the basis of the cash budget, the firm can:
- Invest surplus cash in marketable securities to earn profit; and
- Manage shortages by arranging overdraft or credit facilities with banks.