Research On Cash Flow Control Of ZB Tobacco Group

Cash flow is the receipt and expenditure of currencies in enterprises, which reflects, ensures and controls various enterprise activities dynamically. It not only reflects the affordability of companies, but also directs the decision making and executing processes. As the Asian Financial Crisis and 2008 Financial Crisis occur, bankruptcies due to cash depletion and capital chain rupture hit the globe. China cannot have a narrow escape from this. The short-lived prosperity of Price Smart China and Qinchi, the failure of Ferro China and China National Aviation Fuel have sounded the alarm of cash flow management for the managers. The profit-oriented business philosophy has changed silently, while cash flow as the foundation of firms’ survival and development is drawing more and more attention. Cash flow is regarded as the blood of businesses, since it grants firms with ability to sustainable growth and competitive advantages, reflects financial risks, and enables investors to estimate investment return and sustainability.As SOEs controlled by the state, though the tobacco industry now has adequate fund resources, how to manage cash flow risks and improve cash flow control is the key to avoid business risk, improve economic performance and fulfill group strategic goals. ZB Tobacco Group is a municipal enterprise group with main business in tobacco. Recently, the group is pretty rich in funds, however, its 2 subsidiaries face capital turnover difficulties. On the basis of group cash flow control theory, this article analyzes ZB Tobacco and its subsidiaries’cash flow control situation, and has found that the whole group has blind spots in cash management, lacks control in diversified funds; the group’s comprehensive budget management is still sales and profit oriented, lacks administration and control in cash flows; the group does not have a unified adjustment system of funds, owns large amount of funds which is not fully utilized, has a low return on cash, the subsidiaries are insufficient to funds with high capital cost; the group’s performance evaluation system is still imperfect, with lots of vulnerabilities in subsidiaries’inventory and accounts receivable management. To solve these problems, improve the group’s fund management and profitability, and strengthen the group’s competitiveness, cash flow control systems must be established and optimized, controlling strategies must be improved.Currently, there are pretty much research on centralized control of funds in China. However, little work is done about group members’cash flow differentiated analysis, control and actual detailed operations. With group cash flow management as a starting point, this article conducts analysis on ZB Tobacco’s cash flow control, based on cash flow, group internal control theories. This article indicates ZB Tobacco’s problems on management ideas, organization structures, control systems and control processes. This article proposes a group strategy oriented cash flow control model includes 6 aspects, which are cash flow management organization, cash flow management system, cash flow strategic planning, cash budget control, cash flow risk assessment and early warning, cash flow performance assessment. Also, this article brings up advises and assurance methods on control process in order to realize the combination of people, systems and procedures, further advance the cash flow control, and provide experience on cash flow control researches for similar firms.