Domestic Payment and Collection Instruments and Domestic Clearing

The objectives of cash management are to: ■ minimize the time involved in converting receipts into usable bank funds■ concentrate those funds into a central account where they can be most effectively managed■ control and minimize the cost of payments■ reduce or eliminate borrowings. It is worth remembering that the treasury cash manager only manages cash at one narrow point of the company’s business cycle. That is from the time that receipts become usable funds until the time those funds are used again to make payments. However, an organization is concerned with the effective management of cash at every point of the business cycle. For instance, efficient working capital management will in practice be linked to a company’s production, sales and marketing and administrative controls. These are established to ensure an efficient control over the company’s business processes and to minimize the use of working capital. A company will establish fixed asset controls to ensure not only that fixed assets are purchased and installed as rapidly as possible, but also that their cost is minimized (as far as is consistent with performance). Ultimately, every employee in an organization is a ‘cash manager’: cash is the lifeblood of every business.