Here’s a detailed outline of Cash Management Process Flow

Here’s a detailed outline of Cash Management Process Flow

Cash management predominantly is a process of collecting and managing cash flows. It is crucial for companies to follow this process to maintain overall financial health. When it comes to business, companies must maintain their financial stability.

While it is true that cash management is essential, not many know what exactly happens in this management process.

Below, we give you a detailed outline of the cash management process. This article will also attempt to tell you why knowing this process important.

Cash Management is divided into three main stages, namely:

  • Set-up
  • Transaction processing
  • Accessing data

In the following section, let’s take a closer look at how cash management is set up and how the application used to process transactions and generate reports.

The Set-up

Businesses are expected to set up a banking structure. While setting this, as a business, you have to consider what company structure is. Eventually, you will have to decide the currency in which your company will conduct all the business transactions. Once this is done, here’s what comes next:

  • Set-up Currency (CU):

This part of the set-up is crucial as this will help you attain currency codes. In case, your company operates in multiple currencies; then as a business, you will have to define currency exchange rates and currency relationships.

  • Set-up General Ledger (GL):

The next step is to define at least one general ledger company. This ledger will include the accounts you will post to.

And finally, once these steps are done, you need to set up bank accounts and create a relationship between the company and the cash codes that it will use for future transactions.

Apart from this, you need to mention the payment types that the business will use in:

  • Accounts Payable (AP)
  • Accounts Receivable (AR)
  • Cash Management (CB)

As a safety measure, in the set-up process financial institutions also recommend that you set up

  • Bank transfer tables
  • Cash deposit process levels
  • Cash receipt categories
  • Payment categories
  • Charge codes
  • Payment form codes

The Transaction Processing:

Cash management transaction processing consists of integrating your company’s bank accounts and retaining bank account balance information. Once your company’s bank accounts are merged, you can easily eliminate the chaos of the payments generated by the Accounts Payable application, reconcile accounts receivable and other bank transactions, transfer funds between bank accounts, and enter cash receipts. Then, call you to have to do is release the bank transactions for posting to the General Ledger application. When the company releases the transactions, bank account balances are updated.

The Data Accessing:

The last stage in the process is accessing the data. In this stage of cash management, you can generate reports on bank transactions and transaction history, cash receipt deposits, and fund transfers for a cash code, and cash account activity. Here, as a company, you can also access programs offered by Cash Management to view transactions.

This helps you to comprehend account balances by a period; bank accounts balances in an alternate currency and specific types of bank transactions for a cash code.

While cash management service providers carry out all these stages efficiently, considerable involvement is required from the company too. Hence, it is crucial to understand the cash management process flow.

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