Let’s define what a cash management tool is. A cash management account is a place to hold short-term money. Money that is needed in less than a year (sometimes longer: see sinking funds below) and needs to be easily accessible and safe. These are the two priorities of any cash management tool.
There is a reason the emergency fund — and her close cousins the sinking fund, maintenance account and working capital account — is such a widely held belief. Without the capital needed for extraordinary expenses you risk financial hardship when a large expense arises.
There is another advantage to having these accounts: avoiding the need to borrow at an unexpected times. Business owners understand the advantage of having adequate working capital. They also understand that a financial cushion is more than just a convenience in business. Adequate working capital can remove or eliminate the need to borrow under extreme situations.
The best part of an emergency fund is that you get paid a token amount of interest as you wait for the inevitable versus paying interest because you didn’t plan accordingly. This affects profits.