A Research on the Enterprise Financial Management From the Perspective of Cash Flow Management
II. Recommendations for Solving Problems of Chinese Enterprise Cash Flow Management
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hope to change this situation by virtue of inputting large investment and obtain a higher rate of return. However, enterprises have plunged into a state of vicious capital increase in fact. In addition, companies will have the idea of blindly following the trend in the capital investment activities and fail to conduct pre-market research and prediction and prevention of future risks.
II. Recommendations for Solving Problems of Chinese Enterprise Cash
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by the preparation of the expected cash flow statement. This will be helpful to understand the turnover of capital and enterprise operating capacity in the planning period, and be capable of manifesting the influence of some fund procurement and long-term planning used to the enterprises in the planning period.
2.2 Strengthening the Audit of Fixed Assets Investment Benefits and Medium- term and Later-period Management of FDI Projects
If enterprises strengthen the audit effectiveness of fixed asset investment, this is the key section of ensuring enterprises to recover the cash used for fixed asset investment by virtue of reducing the blindness of purchased fixed assets and inspecting the effectiveness of fixed asset investment. The evaluation and analysis of the audit effectiveness of fixed asset investment play a positive role in improving the scientific level of decision-making, promoting the standardization of investment activities, improving project management and investment efficiency, etc.
Enterprises shall pay attention to the medium and late-period management in foreign investment projects. In order to enhance cash flow management, enterprises' value can be maximized. It is necessary to carry out all-around investment activities rather than the maximization of net cash flow, and then give full play to the
"hematopoietic" function of cash flow generated by investment activities and resolutely avoid deterioration or even disruption of enterprise cash flow management.
The control on the management, supervision and evaluation after establishment of investment project shall be caused enough attention by the enterprise, and it is required to establish relevant post responsibility system to confirm relevant departments and positions of authority. The specific projects should be designated with investment project managers and project supervisors, requiring the project superintendents to be responsible for the effectiveness and benefits of investment and requiring the project supervisors to track the implementation and supervision of the whole process and formulate specific reward and punishment system.
2.3 Reasonable Arrangements of Financing Methods
Enterprises shall timely predict cash flow and formulate relevant financing plans.
The cash flow statement method is the most common method in cash forecasting that can predict the short-term cash flow of enterprises and be helpful the daily cash management and formulates the short-term management plan according to the forecast result. The forecast is made on the basis of the balance sheet and income statement and is the estimation of cash flow statement for long-term development of enterprises that the surplus or shortage of funds of enterprises after a few years can be concluded as well; it is helpful to the formulation of long-term strategic plan of
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enterprises. Moreover, enterprises shall also pay attention to controlling the financial situation and determine solvency at the same time.
Enterprises shall take full account of their short-term and long-term solvency and then develop the relevant financing plans to avoid the cash liquidity problems in the financing process, affecting the normal production and business activities of enterprises.
Enterprises shall balance risk and return and then arrange the methods for financing. As one of the measures to avoid risks, arranging and raising the corresponding period of liability funds shall subject to the length of the use of funds.
If enterprises want to satisfy their own demands of permanent liquid assets and fixed assets, they shall take appropriate financing policies, and the temporary current asset shall be satisfied by short-term liabilities. This not only avoids risky policies under the high-risk pressure but also circumvents the idle funds and waste under the sound policy.
2.4 Improvement of Velocity of Turnover of Cash Flow, Enhancement of Evaluation of Investment Programs and Prevention of Investment Risks
The velocity of cash flow refers to the time from being paid to the recovery; cash turnover ratio is used as a measurement index thereof. The circulation of cash flow will take a certain time, and efficiency of operation of cash and safety of investment recovery will be influenced by the time period of cash cycle in a directly manner which will influence the management efficiency of enterprises. The process that cashes are put into production and operation and finally turned into the cash again is called Cash Turnover Period that is divided into three periods, that is, inventory turnover period, receivables turnover period and accounts payables turnover period.
If, however, an enterprise wants to shorten the cash turn over period, it can be realized by reducing the receivables turnover period and inventory turnover period and extending the accounts payables turnover period and other measures; finally the cash turnover ratio will be increased. Reasonable planning, shortened periods and improvement of turnover ratio of circulation of cash flow will reduce the amount of occupation of working capital of enterprise correspondingly and avoid unnecessary waste of cash, so that the service efficiency of cash can be greatly improved and value of enterprises will be increased therewith. Enterprises, who want to increase their income, may carry out credit sale business. Compared the income from credit sale business with the increase of relevant expenses, we can compare the gains and losses to confirm the credit term and select clients of credit sales. It is necessary to take various measures to collect funds and payment for goods, so that the cost of collecting accounts and loss of bad debt can be reduced to the minimum level.
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Facing with the investment of significant projects, enterprise managers and financial staff shall communicate effectively if enterprises want to manage relevant funds of investment, so that the financial staff will participate in the decision making.
With respect to industrial investment, it is necessary to grasp opportunities and occupy the market and recover investment rapidly, and finally provide sufficient cash flow to ensure continual development of enterprises.
Conclusions
Relevant theory and practice of current cash flow management need to be perfected and supplemented. Even though some advanced enterprises are trying to adopt modern scientific management methods in the actual management, a complete management system has not yet formed. Any contents referred in the book are not completely consistent with the practice, so they should be concluded and summed up in the practice. Therefore, Chinese enterprises enhance the management on cash flow, which have realized the transformation from experience to scientific management with regard to the cash flow management in order to service enterprises perfectly.
The root cause of enterprise value creation is cash flow. It is necessary to analyze the cash flow from the factors of cash flow and combine the effective analysis model to provide the most objective basis for cash flow management. Cash flow has been important for a long time because the development of world economy has become more prominent. In the context of international finance, the best choice for an enterprise controlling sufficient cash is to maintain the good cash flow.
The true and objective business condition of enterprises is reflected by the cash flow of operating activities, which plays a role in improving the financial status and operating results of enterprises and enhancing the ability of continuous operation.
Therefore, in all kinds of cash flows of enterprises, the most important thing is the cash flow from operating activities. Increasing the accumulation of internal capital is the main source of cash inflows from operating activities, which will provide solid financial support for enterprises to expand production, develop new markets and repay debts. If enterprises want to enhance the profitability of enterprises, they must rely on benign cash flow from operating activities. In addition, the development of enterprises cannot entirely rely on external financing; the cornerstone of enterprise development can only be a solid internal accumulation.
Due to the increasingly fierce competition in the market today, more and more difficulties need to be solved by enterprises; the survival and long-term development of enterprises are facing a number of severe challenges. Enterprises shall take the cash flow as a basis to meet competition and challenges. By virtue of high-efficient and scientific cash flow management, enterprises can obtain advantages in the competition only sufficient cash flow can be guaranteed, and finally enterprises will get long-term and sound development.
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To sum up, as one of the most significant standards of evaluation, cash flow management is an important assessment criterion to balance the market competitive edge of enterprises. In the context of modern market economy, enterprises should pay more attention to cash flow management and comprehensively research relevant measures of cash flow management suitable to their own enterprises. Moreover, enterprises shall construct the cash flow management systems for their own enterprises to promote the sustainable development of enterprises.
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