Cash management is a very broad term, which refers to the area of finance that handles the collection and disbursement of funds. When applied to banking, cash management is a marketing term for offering particular services related to cash flow and may be used for specific functions such as cash concentration and zero balancing. Private banking customers may also be offered the services of cash management.
How Cash Management Works
Cash managers are found in a large variety of companies. Their function is to oversee the company’s daily, weekly and monthly cash flow. The goal of the cash manager is to reduce the amount of collectible cash while maximizing the amount of available cash not invested in fixed assets or inventory. They usually begin their careers by working for a large banking firm or other financial institution.
Cash management is one of the most important aspects of a successful business. If, at any time, the organization fails to pay an obligation when it’s due through lack of cash, it is considered insolvent. Companies that experience problems in cash flow are considered investment risks and can be turned down when seeking funds for innovation or expansion. They also may have a difficult time keeping loyal employees if paychecks are not delivered on time.
Typically, a bachelor’s degree in accounting, finance or business is a prerequisite for a cash manager job. Increasingly, businesses desire those who specialize in advanced degree programs, such as a Master of Science in accounting or finance.
Cash managers must know how to be very strategic when handling cash. The strategy of a cash manager is to reduce the amount of time that collected cash is deposited in the bank and when it becomes available for cash flow.
Several factors figure into a cash delay. Envelopes mailed in by the customer do not arrive at the destination immediately; nor is the payment processed and deposited into the bank account the moment it is received. Once the payment is processed, the bank does not always give immediate availability of funds. In order to retain good cash flow between customers, it is important to develop strategic billing and collection practices.
Functions of the Manager
Another role of cash managers is in knowing the company’s optimum cash balance. One of the first steps is in measuring the liquidity or amount of cash on hand to ensure the bills are paid on time. Measurements of cash liquidity include the cash to total assets ratio, the current assets divided by current liabilities, and the cash plus marketable securities divided by total assets.
The private sector is not the only area of opportunity for cash managers. The US Government provides some of the best opportunities for a cash manager job. Cash managers are hired by the US Office of Management and Budget, or OMB. The cash manager is responsible for researching, preparing and supervising the annual federal budget.
The average annual salary of a cash manager is $76,000 a year with an annual average bonus of $8,162. Although, at a projected nine percent growth by the year 2020, the demand for cash managers is a little slower than average, successful cash managers move quickly into positions of increased responsibility, such as treasurer or chief financial officer. The higher positions also reflect a higher increase in salaries.
It’s time to progress in your career and a college education can set you on the right track.