What is Cash Disbursement?

Definition

Cash Disbursement refers to the outflow of cash from a business to settle obligations such as vendor payments, payroll, or other operational expenses. Effective cash disbursement management ensures liquidity, compliance, and alignment with strategic financial planning.

Key Features

• Planning and Forecasting: Involves Cash Disbursement Planning and integration with Cash Flow Forecast (Collections View) to optimize timing and allocation of funds.

• Financial Analysis: Supports Cash Flow Analysis (Management View) and evaluation through Cash Flow Statement (ASC 230 / IAS 7) to assess liquidity and financial health.

• Free Cash Flow Models: Aligns with Free Cash Flow to Equity (FCFE), Free Cash Flow to Firm (FCFF), and the EBITDA to Free Cash Flow Bridge for comprehensive cash flow management.

• Efficiency Metrics: Considers Cash Conversion Cycle (Treasury View) and Cash to Current Liabilities Ratio to measure operational efficiency and liquidity impact.

• Valuation Techniques: May utilize Discounted Cash Flow (DCF) Model for evaluating strategic disbursements and investment decisions.

Summary

Cash Disbursement is the management of cash outflows to meet operational and financial obligations. Effective planning, analysis, and integration with cash flow and free cash flow models ensure liquidity, operational efficiency, and financial stability.