Page 122 - Accounting Best Practices

c06.qxd 7/31/03 1:43 PM Page 111
Implementation Issues for Cash Management Best Practices
Exhibit 6.1 Summary of Cash Management Best Practices 111
Best Practice Cost Install Time
6–1 Access bank account information on
the Internet
6–2 Avoid delays in check posting
6–3 Collect receivables through lockboxes
6–4 Consolidate bank accounts
6–5 Implement area-concentration banking
6–6 Implement controlled disbursements
6–7 Implement positive pay and reverse
positive pay systems
6–8 Negotiate faster deposited-check
availability
6–9 Open zero-balance accounts
6–10 Proliferate petty-cash boxes
6–11 Shift money with electronic funds
transfer
6–12 Use Internet-based cash flow analysis
software
6–13 Utilize an investment policy

Though all of the best practices noted in Exhibit 6.1 are covered in some
detail later in this chapter, it is useful to see how the most important ones fit
together into a coherent set of cash management practices. Accordingly, there is a
flowchart in Exhibit 6.2 that shows how lockboxes and area-concentration bank-
ing can be used to accumulate cash from customers and forward it into a central
bank account, from which cash is distributed only as needed to a payroll zero-
balance account (for payments to employees) and a controlled disbursements
account (for payments to suppliers). By using this approach, cash can be quickly
sent to the main bank account and doled out only when company checks are
cashed, which allows the cash management staff to transfer all remaining funds
to an investment account where it can earn interest, rather than lying idle in any
number of corporate checking accounts.