While the cliché “cash is king” is old, it never gets tired. Everyone knows of, and accepts without reservation, the importance of positive cash flow in sustaining a business and reducing financial risk. Positive cash flow and cash reserves for unforecasted requirements are both a sign of a healthy business. However, a business can be profitable and still go bankrupt if it fails to manage its cash flow.

There are three fundamental building blocks of effective cash management that must be tightly linked to maximize cash flow benefits: working capital optimization, cash flow forecasting and liquidity management. In this issue of The Bulletin, we focus on elements of working capital optimization, the first building block.