Cash Management: Managing Cash Inflows and Outflows

Mike Ablowich of the US Department of the Treasury, Office of Technical Assistance, discussed the managing of cash inflows and Outflows at the 24th Annual ICGFM Conference in Miami Florida. The presentation formed part of the workshop on government cash management.

Mr. Ablowich pointed out that there are accounting and banking controls than can be used. Better control over inflows and outflows enables better cash management.

Accounting controls includes allotments and appropriations. Additional accounting controls include:

• Payment frequency
• On-demand vs. once per week disbursements
• Vendor analysis
• Aggregation of multiple payments to single vendors
• Payment terms

Banking products that are leveraged in the United States are available in other countries:

• Mobile phone banking
  
• Zero balance account to eliminate idle balances
  
• Fraud prevention
  
• Wire transfers
• Automated Clearing House
• Disbursements
• Purchasing and T/E Cards
• Deposits - Paper Checks and reducing fraud through issue file, positive pay & payee name verification
• Armored car/currency
• Lock box
• Credit cards

Mr. Ablowich suggests that developing country governments can advocate these products to banks. The result can be that the private sector in these countries can also make use of the efficiencies associated with these products.

Mr. Ablowich described the advantage of issuing purchasing cards. Purchasing cards reduce controls. Nevertheless, there are numerous advantages for purchasing cards including:

• Simplifies purchasing and payment process
• Responding quickly to disaster problems
• Provide controls by type of expenditure
  
• Lower overall transaction processing costs per purchase
• Increased information for analysis
  
• Reduced paperwork
• Set/control purchasing limits
• Simplify end of year tax reporting
  

Bank reconciliation is a critical part of cash management according to Mr. Ablowich. He advocates daily reconciliation because of the lag between payments and cash balance.