What Are the Different Types of Cash Management?

Cash management services refer to commercial banks' use of their talents, information, technology, and equipment to meet the cash management needs of enterprises, assisting large corporate customers to analyze cash flows scientifically, determine a reasonable cash balance, Inventory cash, demand deposits and cashier's check, bank draft and other monetary assets) are used for short-term investments to increase corporate earnings. Through this service business banks can collect certain fees from it and strengthen the relationship with major customers.

Cash management services

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Cash management services refer to commercial banks' use of their talents, information, technology, and equipment to meet the cash management needs of enterprises, assisting large corporate customers to analyze cash flows scientifically, determine a reasonable cash balance, Inventory cash, demand deposits and cashier's check, bank draft and other monetary assets) are used for short-term investments to increase corporate earnings. Through this service business banks can collect certain fees from it and strengthen the relationship with major customers.

Chinese name

Cash management services

Object

commercial Bank

Function

Strengthened relationships with major customers

Including

Account management, payment management,

Banks can use their own powerful fund settlement and product development platforms to provide enterprises, institutions, governments and other customers with a comprehensive range of cash management products and services, including collections, payments, fund management, information services, etc. The efficiency of customer receivables and payables statistics and settlement, accelerating the collection and adjustment of internal funds, and obtaining cash flow information in a timely and accurate manner. At the same time, banks can also automatically invest short-term idle funds into short-term interest-earning assets through current accounts, zero-balance accounts, and other businesses, thereby providing customers with diversified investment opportunities and increasing return on funds. ^[1]

The cash management services provided by commercial banks mainly include the following aspects: account management, collection and payment management, liquidity management, investment and financing management, risk management, e-commerce, and information services. ^[2]

The development of cash management services is very important for banks, mainly in the following areas: ^[3]

The cash management service marketing strategy cannot be generalized, and the opinions discussed here are for reference only. ^[4]

Main functions and implementation

Cash management service is a comprehensive financial service, and its basic functions can be divided into four levels: cash flow management services, cash retention management services, cash outflow management services, and information services that occur through the above links. It can also be said that all cash management service methods are based on these four aspects as carriers, echoing each other and creating value. ^[4]

(I) Cash inflow management services

Cash inflow management services are banks that provide customers with a comprehensive range of fast collection services based on the characteristics of the movement of funds of different customers to assist customers to quickly collect scattered, in-transit or unreceivable funds, and convert them into The working capital in the account maximizes the capital advantage and lays the foundation for the client's next asset preservation and appreciation. In a word, the company's receivables are collected as soon as possible. It can be seen that the inflow service is mainly reflected in the collection service.

In order to prevent the extracorporeal circulation of funds and strengthen the management of funds, many enterprises have adopted a series of measures to strengthen cash management. These include: the implementation of strict budget management of their own branches; the implementation of a reserve fund system for all departments; the strict management of the opening of bank accounts by branches: "two lines of revenue and expenditure", all income is turned over to the corporate headquarters for unified allocation, The funds required by the branch will be uniformly reviewed and arranged by the corporate headquarters. From this perspective, commercial bank cash inflow management services help customers strengthen the management of accounts receivable, other receivables, and advance accounts, accelerate the return of funds, and reduce and control the proportion of bad debts.

(II) Cash retention management services

The customer's cash retention link is actually a transit point between the turnover and the outflow links. For customers, how to maximize the benefits of this fund on the premise of ensuring payment is its fundamental requirement. For banks, it is the use of suitable financial products that not only meet the requirements of the enterprise, but also bring about intermediate business benefits. It can be seen that cash retention management services are mainly reflected in financial management services. At present, commercial banks mainly provide customers with three types of retention management services, namely account management services, liquid funds management services, and foreign exchange risk management services.

1. Account management services are commercial banks that assist customers in effectively monitoring the flow of funds, outflows, and retention of account funds in accordance with customer financial management needs, and provide comprehensive information services to ICBC's cash flow management service reference implementation methods. Among them, through account revenue and expenditure management services, assist customers to establish two types of income and expenditure dedicated accounts, thereby achieving two lines of revenue and expenditure management. The income account funds can only be transferred to the customer's designated account to ensure the security of the receiving funds; the expenditure account funds can only be transferred from the customer's designated account, and in other cases, the payment is not paid, which is convenient for customers to control the payment centrally; Account balance management services to assist customers in controlling account balances and maintain minimum capital occupation. Through the payment control service, to ensure the key payment of the customer, the payment situation of the account can be controlled to ensure that the customer has sufficient funds in the account when the key payment is required. Through the group secondary account service, an account network is established for group customers. Group customers can use the group secondary account established for them to achieve real-time monitoring, synchronous reflection and classified accounting of the accounts of their affiliated branches.

2. Liquidity financing services. It mainly includes RMB investment services, foreign currency investment services, financing services and entrusted loan services.

In renminbi investment services, commercial banks provide fixed deposits, agreed deposits, notice deposits, or a combination of the above-mentioned deposits, so as to ensure high returns for customers while ensuring payment. For example, if the company has a cash surplus of more than 3 months, due to various restrictions, it is not possible to invest in securities. It can adopt a combination of 3-month periodic and notice deposits to deposit funds of more than 3 months into 3-month regular accounts. If the depositor is less than 1 month, the deposit account is notified. In this way, the enterprise has achieved maximum capital gains with almost no risk. The second is to provide bond investment services. According to the size of the client's investment, the length of the term, and the risk that can be tolerated, the bank can flexibly choose a deposit replacement type, a liquidity guarantee type, a cross-market arbitrage type, a redeemable agreement type, a bill discounting business, The combined use of management-type and financial-planning-type products has yielded higher returns on fixed deposit interest over the same period. When customers lack funds, they can also quickly withdraw funds through bond sales, bond pledge loans, and other forms to meet their needs for liquidity. The third is to provide government bond investment services. When the company's estimated idle funds are long, in addition to time deposits in banks, government bonds can also be purchased. Treasury bonds are called "Phnom Penh bonds". Buying Treasury bonds is not only less risky, but also enjoys interest-free income tax treatment. At present, most of the national bonds issued by the state are mainly book-entry, and their liquidity is greatly enhanced. When enterprises urgently need funds, they can redeem them in advance at the bank. When the bank redeems, it will generally calculate the interest in stages after more than 6 months. . The coupon rate of government bonds is always higher than the bank's loan interest rate for the same period. Considering the tax exemption factor, buying government bonds is more cost-effective than time deposits. The fourth is to provide open-end fund investment services.

In foreign currency investment services, banks are mainly aimed at customers with rich foreign exchange resources, using foreign exchange time deposits, notification deposits and structured deposit services, and foreign exchange funds transactions on behalf of customers to provide financial management services. Among them, structured deposits link ordinary deposits with exchange rates, interest rates, commodity prices, or credit, and combine them with commercial banks' financial derivatives to increase the rate of return on foreign exchange funds within the risk range that customers can tolerate.

In financing services, commercial banks provide customers with loan services, including working capital loans, project fund loans, syndicated loans, discount loans, package loans and entrusted loans.

3 Foreign exchange risk management services. Commercial banks' foreign exchange risk management services mainly include exchange rate risk management services and interest rate risk management services. It is mainly aimed at those customers who not only pursue capital gains but also effectively control exchange rate or interest rate risks. In this regard, commercial banks mainly rely on electronic networks to assist customers in centralized foreign exchange or interest rate risk management, and use financial derivatives to create various investment vehicles to meet customers' needs to increase foreign exchange fund returns.

(3) Cash outflow management services

The cash outflow management service is to provide customers with convenient and fast payment services in response to their fund payment needs, assist customers in simplifying payment procedures, and effectively control centralized payments in order to reduce costs, improve financial management and work efficiency. purpose. It can be seen that cash outflow management services are mainly reflected in payment services. At present, the traditional payment services provided by commercial banks mainly include checks, money orders and cashier's checks. These common payment methods are widely used in payment settlement in the same city or in different places. Among them, the bank's acceptance bill also introduced a new payment service method, that is, the "buyer's interest payment" service. When the bearer holds a bank acceptance bill to apply to the bank for discount, according to the relevant agreement, the bank will pay the full amount in face value, and the discount interest will be paid by the drawer. This payment service further strengthens the bank's acceptance bill payment ability.

(IV) Information services

Information service runs through the entire process of commercial bank cash management services and is also a process of creating value. By providing comprehensive information services, not only can the customer's funds flow and information flow be synchronized, but also can provide customers with more comprehensive information support. Information services have many contents and cover a wide range. They are summarized mainly in providing customers with financial information reports, industry information reports, market information reports, comprehensive information reports, credit management consultants and information inquiry services.

Because the purpose of cash management is to improve the efficiency of corporate fund use, the above functions are often provided to customers through electronic banking platforms, which is why cash management services are often compared with electronic banking. The cash management system of many foreign banks is also formed based on the core electronic banking platform through function expansion. Taking Deutsche Bank as an example, its cash management products are composed of the following parts: core electronic banking platform, interfaces with corporate ERP systems, liquidity management systems, bank account information service systems, corporate receivables and payables management systems, e-commerce systems, Network management system. It can be seen that the so-called cash management system is an extension of the core electronic banking system functions.

In the composition of cash management products, the working capital management system is the core of the entire cash management product. At present, the typical manifestation of cash management is to quickly concentrate small funds scattered by large groups into large funds. In China, increasingly large multi-regional conglomerates are increasing, and even many SMEs have begun an unprecedented cross-regional expansion. At the same point in time, some branches of large groups have surplus funds, and low interest rates are idle on bank books, while other branches may be short of funds and require high interest loans from banks. The starting point of the commercial bank's cash management service is to try to introduce the enterprise to the bank's nationwide capital network, so that local branches can transfer the handheld funds to the large group headquarters account in real time for unified management and scheduling. The headquarters of the large group can make use of the pooled funds to adjust the vacancies at the branches, which can greatly reduce the loan amount and help enterprises to achieve "three highs and three lows", that is, the high deposits, high loans, and high expenses of the company. For low deposits, low loans, low fees. Using cash management, the headquarters of a large group can also collect small funds scattered from various branches into large funds, and then negotiate with the bank to obtain better interest income and reduce financial costs. Cash management can also strengthen the headquarters' ability to control the funds of branches, using the "two lines of revenue and expenditure" model, placing the sales of the branch completely under the control of the headquarters to prevent the branch from occupying sales funds and diverting them to He used.