Cash Management Procedure | TM1010

Cash Management Procedure

The Cash Management Procedure helps plan, track, and direct cash accounts to ensure proper utilization and availability of funds. The company should ensure cash availability through managing cash on hand, cash deposits in daily, medium, and long term accounts, and cash disbursements to best meet the company cash and liquidity needs while managing risk.

The Cash Management Procedure provides methods for planned and proper use of cash resources, preventing cash shortfalls, and balancing risk, liquidity, return, and cost of cash accounts. It applies to Finance and Accounting departments. (10 pages, 1511 words)

Cash Management Responsibilities:

The CFO (Chief Financial Officer) is responsible for overseeing cash management processes to ensure proper cash availability and best practices in cash management, and for completing the TM1010-1 CASH MANAGEMENT PLAN.

Top Management is responsible for approving the TM1010-1 CASH MANAGEMENT PLAN.

Cash Management Definitions:

Liquidity – Ability to convert an asset into cash quickly and without a price discount.

Sweep Account – An account that automatically transfers excess balances out of a cash account and into interest bearing accounts, or vice versa (e.g., from a money market account into a checking account to prevent a shortfall/overdraft).

Liquidity Tree – Dispersing cash among different types of accounts (daily, medium, and long term) to improve return, balance risks, and maintain needed access to funds.

Daily Account – An account that provides immediate access to funds but typically provides no rate of return, such as a checking account.

Medium Term Account – An account that has limited fund availability (e.g., only two withdrawals allowed per month) but provides a better rate of return than a checking account; an example is a money market account.

Cash Management Procedure Activities

• Cash Management Plan
• Cash Management
• Reviewing the Cash Management Plan
• Improving the Cash Management Plan

Cash Management Procedure Forms

• Cash Management Plan Form