1. Avoid losing cash due to misappropriation and theft.
Cash is a liquid asset that is easily misused and stolen but hard to detect. Therefore, a good cash receipt and cash handling system is required so that all transactions are recorded accurately based on business documents such as receipts, receipt copies, checklists, and payment vouchers. Inspection of accounting records from time to time is also important so that any irregularities can be detected immediately.
2. Able to pay short-term debt.
Traders must ensure that there is sufficient cash to pay all bills, operating expenses, and debts to creditors.
3. Avoid losing results due to too much idle cash.
Holding too much cash harms the trader because the cash should be invested in order to get better returns. For example, a trader may deposit cash in a fixed deposit account for benefits.