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Unit 9: Cash Management System

Efficient cash management demands proper outflow and inflow of cash to improve liquidity Notes
and returns while enforcing adequate controls to manage risks.

Financial instruments involved in cash management include money market funds, treasury
bills, and certificates of deposit.
Cash Management offers guaranteed credit and timely MIS.

CMS brings certainty of cash flows and helps in liquidity management.
Account reconciliation is system which allows companies to upload a list of all the checks
that they issue on a daily basis, so that at the end of the month the bank statement will
show not only which checks have cleared, but also which have not.
Automated clearing house is an electronic system used to transfer funds between banks.
Lockbox are for companies with small numbers of payments, sometimes with detailed
requirements for processing.
Positive pay is a service whereby the company electronically shares its check register of
all written checks with the bank.

9.5 Keywords

Account reconcilement: The process of confirming that two separate records of transactions in an
account are equal.
Advanced web services: These services helps the managers to create and empower special internal
log-on credentials.
Cash Management System (CMS): Cash Management Services (CMS) is a mechanism to efficiently
manage cash flow in order to reduce risks, minimize costs and maximize profits.
Disbursement: Amounts paid for goods and services that may be currently tax deductible.
Lock boxes: It allows clients that receive a large number of checks in the mail to set up their own
box in the post office.
Reverse positive pay: A service that transmits to a company issuing checks a file of checks
presented for payment, this is matched to the company’s data for check fraud, which is then
returned.
Sweep Accounts: A bank account that automatically transfers amounts that exceed (or fall short
of) a certain level into a higher interest earning investment option at the close of each business
day.
Zero Balance Accounts: A checking account in which a balance of zero is maintained by
automatically transferring funds from a master account in an amount only large enough to
cover checks presented.
9.6 Review Questions

1. Write short notes on:
(a) Account reconciliation
(b) Advanced web services
(c) Automated clearing house

(d) Cash concentration services

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