Cash Management Techniques Used In The Banking Industry

Cash management is an all-inclusive term relating to cash accumulation, concentration, and outlay. For any business to survive, it’s essential for effective cash management techniques to be in place. The objective of cash management techniques is to maximize cash on-hand accessibility by controlling the cash balances of a company.

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Cash Management Techniques

Here are some of the cash management techniques used in the banking industry:

  1. On-Hand Cash Management

Almost every business nowadays already has the capability to process credit and debit card transactions, which is one of the results of better ATM services available. However, there are plenty of companies that still deal in cash and checks. If your business still handles checks and cash then you must work with your bank to safely deposit your funds in your account. Fortunately, one of the cash management techniques that banks offer to clients is a secured cash transport mode.

What’s a secured cash transport mode? If you’re depositing some money in your bank and don’t want to risk the money by carrying it over land, then you can opt for this mode. It’s better to go for a vehicle with an attached locking facility and it should be equipped with security gadgets like alarm and CCTV cameras, so that you know who is driving the vehicle and everyone who will approach it along the way.

A good vehicle will be able to transport money without any issues and you’ll be able to send the money at any time of the day and even in the night. The best mode of transporting money is done using armored cars as they’re much safer and provides the highest level of security. Compared to having one of your employees carry the cash going to the bank, the secure cash transport service that the banking industry offers is definitely more effective at reducing security risks.

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  1. Cash Disbursement Scheduling

Some business owners may find it tempting to spend cash on hand. That’s why it’s important for entrepreneurs to work on payment scheduling for utilities and rent, vendor invoices, payroll, and even mortgage payments.

The good news is that banks use technologies such as ATM solutions to make cash disbursement and scheduling smooth and efficient. One good example is the utilization of an ACH or Automated Clearing House network. ACH is a computerized network that can process large batches of bank transactions.

An ACH is a system for processing financial transactions, generally domestic bank loans, between participating banks. It can also process debit transfers and credit cards. The system takes the place of an individual who processes transactions manually for each client. This reduces paperwork, which in turn reduces time and errors.

The system will process a bank account number, routing number, and routing code and enter data into an electronic system that’s used by the bank to process the transaction. The data entered is then recorded into the bank’s database, where it’s used to process all transactions from that bank.

Banks find that by using an ACH, it allows them to cut costs on administrative staff and lower their monthly operations cost. The use of an automated clearing house is also recommended by experts.

The reliability of such an automated clearing house depends on the quality of the software that it uses and the way it’s set up. It must be able to withstand natural disasters and to keep a constant maintenance program in order to make sure that it provides a quality service to its users. It’s important to have a review of this type of system before proceeding with it.

  1. Sweep Accounts

Another way of managing the cash flow of a business is to invest some of its on-hand cash in an interest–bearing account. A sweep account is a brokerage or bank account that automatically transfers funds that fall short or exceed, a specific amount to a higher earning investment option in the closing of every business day.

Generally, this money is automatically swept into a high-yield account. For many account holders, this may be a great way to diversify or grow their savings without incurring additional expenses. A sweep account’s goal is to increase your earnings from interest while it maintains a sufficient balance that can cover all withdrawals.

Importance Of Proper Cash Management For Businesses And Banks

If you have a business then cash management is crucial, as this determines your business’s future growth. In the same way, a cash flow analysis is necessary to know your business’ actual expenses, income, cash flow and other vital factors related to cash management. All of these are very important if you want to make sure that your business will run well in the future.

Cash management for businesses starts with proper planning of expenditures, as this can be one of the best tools to ensure that all of your business expenses are covered. The expenses include such things as salaries, rent, office expenses, maintenance, supplies, inventory, advertising, travel expenses, utilities, etc.These are expenses which will surely be recurring ones that need to be paid without fail, and hence they have to be calculated beforehand. The good news is that banks can assist businesses in carrying out these processes.

A bank can only be effective when it has good cash management techniques in place. They’ll be able to manage the withdrawal and deposit of funds as well as their storage and maintenance. Good cash management techniques can also be used to recover money deposited if something should happen to the bank. They can also help prevent the risks that come with money, like losing your hard-earned cash or someone being held liable for someone else’s theft.


The comprehensive changes resulting from ongoing centralization and globalization, as well as the increased utilization of more advanced techniques of cash management and cash management accounts, have a significant impact on the role and definition of the banking industry. Furthermore, it’s expected that cash management activities will achieve a positive value proposition.

The truth is that cash management activities can’t be considered separated from other financial processes. It should rather be integrated into the financial supply chain to ensure a more cohesive system.