From the managerial point of view, two major flows through a business must be planned and controlled. One is the flow of physical goods and services, and the other is cash flow; the former is related with profitability and the latter is related with liquidity. The liquidity control is no less important than the profitability control in business, since a firm with high profitability may be bankrupted because of poor liquidity. Particularly in case of small business, liquidity is much more important in management control.
The major concern of this study is to build up a cash flow management system for small firms. Thus an information system for cash flow in small business is developed, and in addition a mathematical model for short-term loan plan is suggested.
The contents are divided into three parts. In the first part, definitions and meanings of cash flow management are considered. In the second part, a computer based information system, which automatically informs estimated cash balances of the near future, is provided. In the last part, a short-term loan planning model, which is very similar to MRP (Material Requirement Planning), is prepared to finance the expected deficits recognized by the estimated cash balances.
