What Are the Best Tips for Cash Control?

Cash control refers to the control of the cash inflow and cash outflow activities of the company and various responsibility centers. Because the company's financial accounting adopts accrual basis, which results in unequal profit and net cash inflows, it is necessary to control cash separately; and because daily financial activities are mainly cash flows, cash control is very important. Cash control should strive to achieve a basic balance of cash inflows and outflows, both to prevent possible payment crises due to cash shortages and to prevent increased opportunity costs due to cash deposits.

Cash control

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Cash control refers to the control of the cash inflow and cash outflow activities of the company and various responsibility centers. Because the company's financial accounting adopts accrual basis, which results in unequal profit and net cash inflows, it is necessary to control cash separately; and because daily financial activities are mainly cash flows, cash control is very important. Cash control should strive to achieve a basic balance of cash inflows and outflows, both to prevent possible payment crises due to cash shortages and to prevent increased opportunity costs due to cash deposits.

Chinese name

Cash control

Meaning

Cash inflows and cash outflows

Form

The company's financial accounting adopts accrual basis

Types of

financial

Management system

Centralization and decentralization

Cash control refers to the control of cash inflows and cash outflows of the company and various responsibility centers.

Cash control involves a centralized and decentralized management system, that is, whether each subsidiary within the company or the subsidiaries of the group company have decision-making rights and operating rights on the use of monetary funds. The purpose of cash control is to prevent the company from having a payment crisis, and to effectively control the company's operating and financial activities through cash flow. Therefore, the degree of centralization and decentralization of cash control will affect the balance of the company's cash inflow and outflow, and affect the company. Efficiency of business and financial activities. There are several ways to control cash, as described below: ^[1]

1. Revenue and expenditure

Unified revenue and unified expenditure means that all cash activities of the company are concentrated in the financial department. Each branch or subsidiary does not set up a separate financial account. All cash income is concentrated and paid to the financial department. All cash expenditures are paid through the financial department. The right to approve cash receipts and payments is highly concentrated in the hands of the operator, or in the hands of a representative authorized by the operator. The method of unified revenue and expenditure helps to achieve the balance of cash revenue and expenditure, improve the efficiency of cash flow, reduce cash deposits, and control the outflow of financial cash of 118 companies; however, the unified revenue and expenditure method is not conducive to mobilizing the initiative of open source and expenditure reduction at all levels , Affecting the flexibility of operations at all levels, so as to reduce the efficiency of the company's operating and financial activities.

2. Set up a settlement center

The settlement center is a special institution established within the company, especially within a group company, which handles the cash receipts, payments, and settlement transactions of various member companies or branches within the company. It is usually located in the finance department and is an independent functioning agency. The main functions of setting up a settlement center are:

(1) Centrally manage the cash income of each member company or branch. Once each member company or branch receives the cash income, it must be transferred to an account opened by the settlement center in a bank and cannot be misappropriated.

(2) Allocate the monetary funds required by each member company or branch for business, and monitor the use of monetary funds.

(3) Uniform external financing to ensure the capital needs of the entire company and group.

(4) Settle transactions between member companies or branches.

(5) Calculate the net cash flow of each member company or branch in the settlement center and the corresponding interest cost or interest income.

(6) Check the daily cash balances retained by each member company or branch.

It is not difficult to see that in the way of setting up a settlement center, each member company or branch has independent financial rights. In terms of cash management, its operating rights and decision-making power have been continuously expanded. The company or group company has passed the approval authority for cash expenditures and monitors cash in accordance with regulations. Scope and standards are used to implement cash control.

3 Setting up an internal bank

An internal bank is an internal fund management organization established by introducing the basic functions and management methods of a social bank into the company's internal management mechanism. Its main responsibility is to carry out daily transactions and settlements, fund transfers, and operations planning within the company or group of companies, including the following: several aspects:

(1) Set up an internal settlement account. Each member company or branch opens an account in an internal bank. All physical transfers and labor service cooperation in its production and operation activities are regarded as commodity transactions and transactions are settled through internal banks.

(2) Issuance of internal checks and internal currency. Internal banks issue their own internal checks and internal currencies in accordance with relevant regulations and use them between member companies or branches.

(3) Issue internal loans. Internal banks issue loans to companies or group companies based on their fixed capital and fee quotas for their respective member companies or branches, combining actual needs. The first is the full paid special method, that is, whether it is an internal loan within a fixed amount or over a fixed amount, the paid special method is used to calculate the interest; the second is the differential paid method, which is to calculate the interest on the loan outside the fixed amount or to accumulate more interest. .

(4) Internal banks raise funds externally. Each member company or branch does not have the right to raise funds externally, and the internal banks conduct unified operations planning according to the operating conditions and reasonably arrange the funds.

(5) Develop a settlement system. Internal banks formulate a unified internal settlement system, including settlement methods and time, and regulate settlement behavior; at the same time, they monitor the rationality and legitimacy of the flow of funds in the settlement business, detect unreasonable flow of funds in a timely manner, and correct blindness in the use of funds And limitations.

(6) Establish an information feedback system. The internal bank regularly or irregularly reports the circulation of funds to each member company or branch in the form of a report, reports it to the company or group company, and grasps the use of funds in a timely manner.

(7) Banking management. Internal banks also implement bank management, establish loan responsibilities, strengthen asset and liability risk management, and implement relatively independent accounting and self-financing. It is not difficult to see that the establishment of an internal bank is to introduce a simulated bank-enterprise relationship into the internal fund management of a company or group. The relationship between each member company or branch and the company or group company is a loan management relationship. Settlement centers, currency issuance centers, loan centers and supervision centers.

4 Way of setting up a financial company

Finance company, also known as Finance Co., Ltd., is a non-bank financial institution operating part of the banking business. The division of labor of financial companies is very professional. Some financial companies specialize in mortgage lending business, some financial companies rely on absorbing large-term deposits as a source of funds for loans or investments, and some financial companies specialize in leasing or installment sales of durable consumer goods. business. The business scope of finance companies has been expanding day by day, and is almost the same as that of investment banks. Large finance companies also operate foreign exchange, joint loans, underwritten bonds, real estate mortgages, financial and investment consulting.

From the perspective of the function of the finance company, the establishment of a finance company by a group company is to introduce a fully market-oriented company-company or bank-enterprise relationship into the group's internal fund management. Finance companies have the following characteristics:

(1) Each subsidiary of the group has completely independent financial rights, can operate its own cash on its own, and exercise decision-making power over the use of cash.

(2) The Group's cash control over its subsidiaries is carried out through finance companies. Finance companies, through loans or invested capital of the group's subsidiaries, are subject to expert restrictions as creditors or owners, and this restriction is based on their own independent economic interests.

(3) The operator of the group company (or the highest decision-making body) no longer directly intervenes in the cash use of the subsidiary.