Cash Management Techniques - Case Study Example

1. The company usually creates realistic cash flow budgets for both short term and long term. This helps the company to critically analyze the management policies of their cash and also pass recommendations to improve their current strategies. Competition- A company business environment plays a critical role in determining the credit policies that the company will adopt. The practices being carried out by other players in the industry will be a deterministic factor as well. In a relative competitive business environment, a high degree of importance is usually emphasized in regard to credit availability.

The reason behind this is to ensure that the company remains competitive since it will be an attraction to clients. Even when the industry is not competitive enough, a company can use credit availability as a tool to be more competitive ( Cooper, 2004). Customer type-The type of customers that a company interacts with will be critical in deterministic of the policies the company will adopt. In situations whereby the clients of the company are characterised with short capital it is unlikely the company will adopt policies that will increase credit availability ( Albrecht, Stice, & Stice, 2010).

Profit margin- the profit margin from goods or services provided by the company is a critical deterministic aspect of the credit policies a company will implement. If the profit margins are slim, then the credit department needs to be careful about the policies they adopt. On the other end, high profit margins are more tolerant to risks associated with credit, thus allowing more flexible and ease policies ( Albrecht, Stice, & Stice, 2010). The government regulations - government might set specific credit regulations in order to govern the sale of specific commodities for example alcohol.

Therefore, companies should select credit policies that are in line with government regulations. Short term financial