Cash management and liquidity management are related concepts, but they refer to slightly different aspects of a company’s financial management.
Cash management refers to the process of managing the inflows and outflows of cash within a business in order to optimize cash balances and ensure that the business has sufficient cash on hand to meet its short-term obligations. Cash management typically focuses on optimizing the timing of cash flows, reducing the cost of maintaining cash reserves, and investing excess cash in short-term, low-risk investments.
Liquidity management, on the other hand, refers to the broader process of managing a company’s short-term and long-term financial resources in order to ensure that the company can meet its financial obligations and maintain financial stability. This includes managing not only cash but also other liquid assets such as marketable securities, accounts receivable, and inventory.
While cash management is focused specifically on managing cash flows, liquidity management takes a more holistic view of a company’s financial position and focuses on managing a variety of financial resources to ensure that the company remains solvent and financially stable.
In summary, while cash management is a subset of liquidity management, liquidity management encompasses a broader range of financial resources and focuses on overall financial stability and solvency.