Cash Management
Cash management also known as treasury management for certain services render primarily to larger business customers. It may be utilized to describe all bank accounts such as checking accounts offered to businesses of a certain size. If it is more often utilized to describe specific services such as zero balance accounting, automated clearing house facilities and cash concentration. Often times, private banking customers are provided cash management services.
The following is a list of cash management services are offered by banks and employed by larger businesses and corporations:
i) Account Reconcilement Services:
Balancing a checkbook can be a tough process for a very large business, as it issues so many checks it can take a lot of human observation to understand which checks have not cleared and thus what the company's true balance is. To do this, banks have formulated a system which permits companies to transfer a list of all the checks that they issue on a daily basis. This way, at the end of the month the bank statement will display not only the checks that have been cleared, but also which have not. The banks have utilized this system to forbid checks from being fraudulently cashed if they are not on the list. This process referred as positive pay.
b) Advanced Web Services:
All banks have an internet-based system which is very much advanced than the one available to consumers. This allows managers to generate and authorize special internal logon credentials, permits employees to send wires and access other cash management characteristics not found on the consumer web site.
c) Armored Car Services:
Large number of retailers who collect a higher deal of cash may have the bank pick this cash up via an armored car company rather than asking its employees to deposit the cash.
d) Automated Clearing House:
These services are generally offered by the cash management division of a bank. The Automated Clearing House is an electronic system utilized to transfer funds among banks. Companies utilize this to pay others, especially employees. Few companies also use it to collect funds from customer. This system is criticized by some consumer advocacy groups, as under this system banks consider that the company initiating the debit is correct until proven otherwise.
e) Balance Reporting Services:
Corporate clients who actively manage their cash balances generally subscribe to secure web-based reporting of their account and transaction information at their lead bank. These compilations of banking activity may comprise balances in foreign currencies, as well as other banks. They comprise information on float positions as well as cash. Finally, they renders transaction specific details on all forms of payment activity, comprising, checks, wire transfers in and out, deposits, Automated Clearing House debits and credits, investments, etc.
f) Cash Concentration Services:
National chain retailers usually are in regions where their primary bank do not have branches. Thus, they open bank accounts at different local banks in the area. To protect funds in these accounts from being dead and not earning sufficient interest. Many of these companies have an agreement set with their primary bank, through which their primary bank utilizes the Automated Clearing House to electronically "pull" the money from these banks into a single interest bearing bank account.
g) Lock box Services:
Sometimes companies who receive a large number of payments through checks in the mail, for them the bank set up a post office box for them and open their mail to deposit any checks found. This service is known as lock box service.
h) Lock box Wholesale services:
There are some companies with small numbers of payments and have detailed demands for processing. This may be a company like a office of a dentist or a small manufacturing company.
i) Positive Pay:
Positive pay is a service through which the company electronically shares its check register of all written checks with the bank. The bank thus only pay checks listed in that register, with exactly the similar specifications as listed in the register. This system help to reduces check fraud.
j) Reverse Positive Pay:
Reverse positive pay is very similar to positive pay, but the process is reversed, where a company and not the bank, maintaining the list of checks issued. When checks are brought for the payment and clear through the Federal Reserve System. Then the Federal Reserve creates a file of the account numbers of check, serial numbers, dollar amounts and sends the file to the bank.
Then the bank sends that file to the company, where the company compares that information to its internal records. The company allow the bank know which checks match its internal information and the bank pays for them. The bank then inquiries the checks that do not match, if there is any misread corrects it or encoding errors and decides if any fraudulent. The bank pays only true exceptions, i.e , those can be reconciled with the company's files.
k) Zero Balance Accounting:
It can be believed of as somewhat of a hack. Companies with large numbers of stores or locations can very often be baffled if all those stores are depositing into a single bank account. Earlier, it would not be possible to know which deposits investor are from which stores without seeking to view images of those deposits.
To correct this problem, banks ave designed a system where each store is given their own bank account, but all the money deposited into the individual store accounts are automatically moved into the company's main bank account. This permits the company to look at individual statements for each store. In U.S. banks are converting their systems so that companies can specify which store made a specific deposit. If all these deposits are deposited into a single account, zero balance accounting is being utilized less frequently.
l) Wire Transfer:
It is an electronic transfer of funds that can be done by a transfer of cash at a cash office or a simple bank account transfer. Bank wire transfers are expedient method for transferring funds among bank accounts. A bank wire transfer is a message to the receiving bank requesting them to affect payment with respect to the instructions given. The message also comprises settlement instructions. The actual wire transfer itself is virtually instant, require no longer transmission than a telephone call.
m) Controlled Disbursement:
This is one of the product by banks under Cash Management Services. The bank renders a daily report, typically early in the day. That report offers the amount of disbursements that will be accused to the client's account. This knowledge of daily funds requirement permits the customer to invest any surplus in intraday investment opportunities. This is entirely different from delayed disbursements, where payments are issued through a remote branch of a bank and customers are able to delay the payment due to increased float time.
In the past, other services have been rendered the usefulness of which has decreased with the rise of the internet services. For instance,
a) Companies could have provided daily faxes of their most recent transactions.
b) Companies could have sent CD-ROMs of images of their cashed checks.
Cash management services can be expensive but usually the cost to a company is out weighed by its benefits such as efficiencies cost savings,accuracy etc.
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