Cash management techniques help businesses efficiently manage cash inflows and outflows. Some key techniques include budgeting to reduce expenses, investing excess cash, using credit judiciously, and generating additional income. Businesses can also use physical cash management services, electronic funds transfer, controlled disbursement of checks, sweep accounts to maximize interest, and cash concentration. Choosing the appropriate combination of techniques from banks can optimize a business's cash management.

1. CASH- BANK
TEACHER:
Atty. Ma. RosafeAmelou V. Saril, CPA
GROUP 1

3. CASH
- Cash in a broader sense includes coins, currency notes, cheques
, bank drafts and also marketable securities and time deposits with
banks.
Cash is known as most liquid and less productive assets of a firm. If cash
remains idle, earns nothing but involves cost in terms of interest payable
to finance it. Although cash is least productive current assets, firm should
hold certain amount of cash for marketable securities.

4. OBJECTIVES , REASONS
AND MOTIVES FOR
HOLDING CASH

5. OBJECTIVES AND REASONS FOR
HOLDING CASH
 a) To meet payment needs of trading & business activities.
 b) To minimize idle funds
 c) To avoid cash crunch
 d) To maintain liquidity
 e) To make payments to creditors and suppliers on time.

6. MOTIVES FOR HOLDING CASH
 1) Transaction Motive – for routine business/ operating payments
 2) Precautionary Motive — to provide for unexpected/ unpredictable events like strike, flood,
increase in raw material cost etc.
 3) Speculative Motive — to take advantage of unexpected opportunities like favourable/
reduced prices of material , discount for bulk purchases etc.
 4) Compensating Motive – Minimum balance is required to be
maintained with the banks for various services provided by them.

7. MOTIVES FOR HOLDING CASH
 Transactions Motive
Cash balances are kept in order to meet routine cash needs of the business, such as the
purchase of raw materials, payment of employees’ wages, etc…
 Precautionary Motive
Unanticipated cash demands require that an additional amount is kept to be able to meet such
unexpected demands. Unanticipated cash demands can vary from unexpected rise in the prices of raw
materials, debtors delaying their payment further than expected, strikes, etc…

8. MOTIVES FOR HOLDING CASH
 Speculative Motive
Speculative balances are kept in order to allow the business to take advantages of any
opportunities which may present themselves at unexpected times. Suppliers at times may try to attract
companies by giving special discounts, but you must pay in cash.

9. OBJECTIVES OF CASH MANAGEMENT
 Meeting Cash Balances
The financial manager must ensure he has enough cash in hand to pay suppliers, creditors,
employees, shareholders, banks, etc…
Most financial managers at times go a step further and keep even more than required. This can be the
result of various factors such as:
 Enhancing the company’s reputation – settling payments on time keeps creditors and suppliers
happy
 Taking advantage of trade discounts by paying your debts on time
 Stronger negotiating power when dealing with suppliers
 Unexpected cash requirements can be met with no problem at all

10. OBJECTIVES OF CASH MANAGEMENT
 Minimising idle balances
Too much cash tied up in idle balances waiting for something to happen involves an opportunity
cost and hence loss of profits. As you minimise the cash balance, you increase the chance of a
shortfall and of failing to meet your payments schedule.

11. CASH MANAGEMENT
TECHNIQUES
Good cash management techniques are vital to the success of any business. In times of
economic difficulty, it is even more important to ensure the inflow and outflow of money is carefully and
cleverly managed. A variety of cash management techniques are offered by the banking industry for
large and small businesses. These services will not only simplify cash management procedures for
your business, but they will also help you safeguard your financial situation by preventing losses and
maximizing the earning potential of every dollar.
Cash management is a set of strategies or techniques a company uses to collect, track and invest
money. Although cash by definition refers only to paper or coin money, in cash management,
companies usually also work with cash equivalents such as checks. This is becoming increasingly
common as the money system becomes more abstract, using electronic methods

12. CASH MANAGEMENT
TECHNIQUES

13. CASH MANAGEMENT
TECHNIQUES
 Budgeting
A budget is the cornerstone of any sound financial plan. Budgeting is simply the process of tracking
your monthly expenses to determine how you're really spending your money. By making a list of monthly
expenses you can discover areas where you can reduce or even eliminate spending and expenses. By
preparing a budget, there's a good chance you will free up extra cash to use for other purposes, like
investing.
 Investing
Speaking of investing, there is no shortage of places where you can put that extra cash you
uncovered by budgeting. An effective way to manage your investment dollars is to start a systematic
program that allows you to invest with little pain and effort. If you have a 401(k) plan at work, for example,
you can set it up so that money is automatically deducted from each paycheck and invested into the plan.
You'll get used to the "missing" income and you'll be ensuring that you're saving for the future.

14. CASH MANAGEMENT TECHNIQUES
 Credit
Credit can help you in times where you're a little short on cash or facing a financial emergency. Credit
cards are probably the most common and easily accessible form of credit, but they must be used judiciously
to avoid falling into debt. If you own a home, and have built up some equity, you can borrow against it in the
form of an equity loan or line of credit to obtain needed cash at a relatively low interest rate.
 Generating Income
Don't overlook the option of generating additional income as an effective cash management technique.
There are many ways you can bring in more dollars, such as getting a second job, selling unwanted stuff on
eBay or adjusting your tax withholding on your W-4 form to reduce the amount deducted from your
paycheck. If you have a set of unique skills, you could put them to use by starting a small side business
online or out of your home.

15. CASH MANAGEMENT TECHNIQUES
 Physical Cash Management
Although the banking industry has gone almost fully electronic, there are a few services that
computers can't replace.
If your business deals with large amounts of cash, a regular collection service by armored car is safer
than sending an employee to the bank with a bag of bills.
For businesses that receive a lot of check payments by mail, a lockbox greatly reduces staff time
spent processing them. Customers mail their payments to a PO box under your business's name.
Bank staff collect, open and process the payments according to your requirements, and deposit the
money directly to your account

16. CASH MANAGEMENT TECHNIQUES
 Management of Cash Disbursement
Internet banking for businesses is generally quite flexible, allowing you to create profiles and access
levels for different employees. It also allows you to instantly view account balances and transfer money
between accounts.
The Automated Clearing House (ACH) is widely used by companies for paying employees. Employee
bank account details and pay rates are registered with your bank, and salaries are automatically paid by
direct deposit. It is also useful for businesses such as fitness centers, utility companies, or charities that
receive regular payments or donations via direct debit.
If your business makes a lot of payments by check, or regularly writes checks for large amounts,
controlled disbursement helps ensure your payments clear. The bank will send you a report early in the day
advising you of any checks due to clear that day. You can then transfer the exact amount needed to your
disbursement account. Your checks don't bounce, and you don't lose any interest earnings by having idle
cash in the account.

17. CASH MANAGEMENT TECHNIQUES
 Cash-Maximization Techniques
An important part of cash management is maximizing potential interest returns on your money.
Naturally, the banking industry has more than one technique to help you achieve this.
A sweep account helps to maximize cash available for investment. When the account balance
rises above a specified minimum, the bank automatically sweeps the funds into an investment
account. If the account balance drops below the specified level, sufficient funds are automatically
swept back.
Cash concentration is especially useful if your business has several locations, with separate bank
accounts for each location. Your bank can arrange to regularly transfer funds from these disparate
accounts into one central account. This allows you to use the money more efficiently -- for example, in
investments or high-interest accounts.

18. CASH MANAGEMENT TECHNIQUES
 Choosing the Appropriate Technique
Banks have developed variations on the techniques listed and many more, to suit businesses of
all sizes, and have trained advisers to help you choose which ones will best benefit your business. You
will probably find you need more than one service. One example of these services is offered by
Citizens Financial Group, which launched a user-friendly package of integrated cash management
services. Targeted to small- and medium-sized businesses, the package price is 30 to 40 percent
cheaper than purchasing each service separately.