METHOD OF EASING CASH SHORTAGE

METHOD OF EASING CASH SHORTAGE

The method of easing cash shortage is to accelerate cash collection and to decelerate or delay cash disbursement. The following are method of easing cash shortage:

i. Accelerating cash collection: The Corporation can conserve cash and reduce its requirement for each balance if it can speed up the cash collections.

The corporation can accelerate its cash collection by making use of the technique known as decentralization collection.

It is a system of operating through a number of collection center instead of a single collection, the corporation will have a large number of bank account operated in the areas where the corporation has its branches the collection entirely will transfer fund above some predetermined minimum to a central bank account generally at the corporation head office.

ii. Controlling Disbursement: Effective control of disbursement can also help the corporation in controlling cash and reducing the financial requirements while the objective of the corporation in collecting cash is to speed up collection as much as possible, the objective of disbursement by delaying payments the corporation can make use of the trade credit given to them as a source of finance which is interest free and this results in maximum availability of funds.

Although developing disbursement may danger its credit standing as this can put the corporation in difficulties in obtaining enough finance.