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Revision as of 13:36, 24 August 2006
In United States banking, cash management, or treasury management is a marketing term for certain services offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking accounts) provided to businesses of a certain size, but is more often used to describe specific services such as cash concentration, zero balance accounting, and automated clearing house facilities. Sometimes private bank customers are given cash management services
Cash Management Services Generally offered
The following is a list of services generally offered by banks and utilized by larger businesses and corporations:
- Armored Car Services: Large retailers who collect a great deal of cash may have the bank pick this cash up via an armored car company, instead of employees depositing the cash.
- Account Reconcilement Services: Balancing a checkbook can be a difficult process for a very large business, since it issues so many checks it could take a lot of human monitering to understand which checks haven't cleared and therefor what the companies true balance is. To get around this, banks developed a system where the companies can daily or less often upload a list of all the checks they issued, so that at the end of the month the bank statement not only will show what checks have cleared but also what hasn't. More recently banks have used this system to prevent checks from being fraudulently cashed if they aren't on the list, a process known as positive pay.
- Balance Reporting Services: Corporate clients that actively manage their cash balances usually subscribe to secure web-based reporting of their account and transaction informations at their lead bank. These sophisticated compilations of banking activity may include balances in foreign currencies as well as those at other banks. They would include information on cash postitions as well as 'float' (eg. checks in the process of collection). Finally, they offer transaction-specific details on all forms of payment activity, including deposits, checks, wire transfers, ACH (automated clearinghouse debits and credits), investments, etc.
- Cash Concentration Services: Large or national chain retailers often are in areas where their primary bank does not have branches. Therefore they open bank accounts at various local banks in the area. To prevent funds in these accounts from being idle and not earning sufficient interest, many of these companies have an agreement set with their primary bank, whereby their primary bank uses the Automated Clearing House to electronically "pull" the money from these banks into a single, interest bearing bank account.
- Advanced Web Services: Most banks have an internet based system which is more advanced than the ones they normally offer to consumers. Usually this allows users to delegate specific logon names and authorities for their employees. It allows these employees to send wires and access other cash management features normally not found on consumer online banking.
- Automated Clearing House: services are usually offered by the cash management division of a bank. The Automated Clearing House is an electronic system used to transfer funds between banks. Companies use this to pay others, especially employees (this is how direct deposit works). Certain companies also use it to collect funds from customers (this is generally how automatic payment plans work). This system is the subject of the ire of some consumer groups, because under this system all banks assume that the company initiating the debit is correct until proven otherwise.
- Lockbox services: Often companies which receive a large amount of payments via checks in the mail (such as utilities), have the bank set up a PO Box for them, open their mail and deposit those checks. This is called "lockbox".
- Zero Balance Accounting: can be thought of as somewhat of a hack. Companies with large amounts of stores or locations could very often be confused if all those stores deposited into a single bank account. Traditionally, it would be impossible to know which deposits were from which stores, without seeking to view images of those deposits. To help this problem, banks developed a system where each store was given their own bank account, but all the money deposited into the store account was automatically moved into the companies main bank account. This allowed the company to look at individual statements for each store. US Banks at the present time however are almost all converting their systems so that companies can tell which store made a particular deposit, even if these deposits were all being done into one account. Therefore zero balance accounting is being used less frequently.
- Positive Pay: Positive pay is a service whereby the company electronically shares its check register of all written checks with the bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud.
- Sweep Accounts: are typically offered by the cash management division of a bank. Under this system, excess funds from a companies bank accounts are automatically moved into a money market mutual fund overnight, and replaced the next morning. This allows them to earn interest over night. This is the primary use of money market mutual funds.
Certain other legacy services were offered whose usefulness had diminished with the rise of the internet. For example, companies could have daily faxes of their most recent transactions, or be sent CD-Roms of images of their cashed checks.