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Cash management services

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  1. Introduction
  2. Typical trade cycle
  3. Traditional collection mechanism
    1. Importance of cash management for a corporate entity
    2. Importance of fee-based services segment to banks
    3. How corporates select a bank for sourcing cash management services ?
    4. A framework to provide effective cash management services
    5. Limitations of the services
    6. Types of cash management services
  4. Cash management products
  5. Salient features of CMS
  6. Benefits to the customer
    1. Local cheque collection service
    2. Operational procedure
    3. In respect of returned instruments
    4. Pooling of collected funds
    5. Important guidelines for Local Cheque Collection (LCC) service to be observed by the operating branches
    6. Deposit Slip (DS)
    7. Clearing presentation and returns - Accounting
    8. Confirmation of transactions
    9. Courier management
    10. System related matters
    11. Reconciliation of CMS pool accounts
  7. Payment services
    1. Remote payouts
    2. Case study on cash management services at a bank
  8. Correlation with Current Account Balances
  9. Recommendations
  10. UCC
  11. Conclusion

With the growing pressure on interest spread, banks are focusing their attention on the 'fee based' Services. The exponential growth in IT and Communications has helped banks in developing and delivering customer friendly products in the areas of Collections and Payments.

As we are all well aware, the fundamental objective of cash management is ?optimization of liquidity through an improved flow of funds'. In today's highly competitive environment, where time is considered as money, deployment of staff to render basic routine tasks does not make economic sense.

As a sequel, cash management today is not what it used to be. Electronic banking, which began as a passive desktop access to bank balances, is emerging into complex processes f liquidity management through numerous techniques.

Almost all of the corporations in advanced countries are now planning to use the services of banks to help them collect payments on monthly bills they issue to consumers and other types of cash management services. According to the findings of a Study conducted by Killen and Associates the top 400 Canadian enterprises can save $23 billion annually by applying emerging electronic cash management strategies. The Killen Study, states that in 2005, $300 billion worth of electronic payments will be collected over e-billing networks, which is a mammoth extension of cash management services. Commercial banks in the Western countries realized the tremendous potential in providing cash management services to vastly improve their profitability. In a report titled ?The Future of Wholesale E-Banking : The Portal' which was published by Celent Communications it was projected that by 2003, 40 per cent of the top 100 US banks will be offering advanced Internet portals to their business customers. In an urge to consolidate and expand customer relationships and to stay ahead of the competition, wholesale banks have turned to the next generation of personalized and uniform online Cash Management Services. The ultimate cash management solution as seen by many corporate is a fully centralized management of financial and commercial payments where intra-group companies have no external bank accounts, except a local account for petty cash.

[...] Challenges to Companies in Availing Technology-oriented Cash Management Services from Banks: - Corporates do face some challenges in putting in place new cash management structures. Analysts believe that companies will increasingly demand online real-time cash-management services. The commercial need for Internet delivery of cash management will be driven by the increasing number of businesses using the Internet and other networks Electronic Communication with a Bank The first challenge facing a treasury is how to communicate electronically with a bank, although this is often dictated by cost limitations, security concerns and the infrastructure peculiarities of different countries. [...]


[...] Courier Management IB Department, CO has made arrangement with Skypak Couriers for the pick- ups to be made from the Client's offices, wherever requested, across all the Operating Branch locations. IB will advise the Agency to arrange for the pick-up, wherever required and the copy of this letter will be sent to the branch also. Branch should monitor the pick-up and keep a strict vigil on the functioning of the Agency Branches need not make any payment to the Local Office of the Agency for these courier pick-ups. [...]


[...] Proposal booking : IB desks at Zones, Branches identify the target clients and make concerted efforts to market our Cash Management solutions to them. They will send the proposal of the interested client in the prescribed format 2. Sanction : After scrutinizing the proposal, will sanction and convey the same to the respective IB Desk/Branch and also to CMS-HUB to operationalize the arrangement . IB will also provide the necessary LCC Deposit Slip forms to the Client directly and will also advise the Client of the procedures involved in this Service. [...]

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