Background Note | HBS Case Collection | December 1998

Cash Management Practices in Small Companies

by H. Kent Bowen, Andrew R. Jassy, Laurence E. Katz, Kevin E. Kelly and Baltej Kochar

Abstract

Most small business managers claim that cash management is their leading concern. Often walking a tightrope between growth and illiquidity, small business managers face different cash management challenges than their counterparts in larger companies. Compared to larger firms, small businesses often have under-staffed and under-trained accounting staffs, volatile cash flows dependent on a single product line, limited access to new capital, and a significant share of their net worth tied up in working capital. These limitations are often compounded by management's focus on growth, which can put additional pressure on the cash management system by increasing net working capital requirements.

Keywords: Motivation and Incentives; Working Capital; Management Practices and Processes; Organizational Design; Cash; Forecasting and Prediction; Policy; Business Strategy;

Citation:

Bowen, H. Kent, Andrew R. Jassy, Laurence E. Katz, Kevin E. Kelly, and Baltej Kochar. "Cash Management Practices in Small Companies." Harvard Business School Background Note 699-047, December 1998.