What is Cash Settlement?

Cash settlement is the symmetry of settlement of transfers. It refers to the act of directly using cash for settlement of accounts receivable and payable in economic transactions such as commodity transactions and labor service supply. It is one of the forms of currency settlement. In China, it is mainly applicable to sporadic small-scale receipts and payments between units and individuals below the cash settlement threshold. ^[1]

Cash settlement

There are two main channels for cash settlement: one is that the payer pays the cash directly to the recipient, without going through an intermediary such as a bank; the other is that the payer entrusts the bank and

Compared with transfer settlement, cash settlement has the following characteristics:

(1) Direct and convenient. Under the cash settlement method, the buyer and seller pay one hand and deliver one hand. The money and goods are cleared in person, without going through an intermediary. Therefore, it is the most direct and convenient for the buyer and the seller.

Also in terms of labor service supply, credit deposits and fund transfer, cash settlement is also the most direct and convenient, so it is widely accepted by the general public.

(2) Insecurity. Because cash is extremely widely used and convenient, it has become the main target of criminals' puppets, and it is easy to be stolen, corrupted and misappropriated. In real economic life, most of the economic criminal activities are related to cash. In addition, cash is also prone to losses due to fires, bugs, and rat bites.

(3) It is not easy to control and manage macroscopically. Since most cash settlements are not done through banks, it makes it difficult for the state to control them. Too much cash settlement will cause too much cash in circulation, which will easily cause inflation and increase pressure on prices.

(4) Higher costs. Using cash to settle each unit can reduce the bank's hand

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Renewal costs, but the costs of inventory, transportation and storage are significant. For the entire country, excessive cash settlement will increase the cost and loss of printing, storage, transportation of cash, and recovery of used cash, and waste human, material and financial resources. Therefore, the state implements cash management to limit the scope of cash settlement.

The starting point for cash settlement is 1,000 yuan. See:

Provisional Regulations on Cash Management

Decree of the State Council of the People's Republic of China

(No. 12)

Article 5 The account opening unit may use cash within the following scope:

(1) Staff wages and allowances;

(2) Personal labor remuneration;

(3) Various scientific and technological, cultural, art, and sports bonuses awarded to individuals in accordance with state regulations;

(4) Various labor insurance, welfare expenses and other expenditures on individuals stipulated by the state;

(5) the purchase price of agricultural and sideline products and other materials from individuals;

(6) Travel expenses that travellers must carry with them;

(7) Sporadic expenditures below the settlement start point;

(8) Other expenses determined by the People's Bank of China to be paid in cash.

The starting point for settlement in the preceding paragraph is set at 1,000 yuan. The adjustment of the settlement starting point shall be determined by the People's Bank of China and reported to the State Council for the record.