02-05-2014, 03:08 PM
Cash Management: Part 1: From Concepts to Developing an Adjusted Budget
Cash Management:.ppt (Size: 289 KB / Downloads: 122)
Definitions
Cash, budget, treasury and liquidity can all get confused at this point
No one term exists for the management of in-year budgets
This is not about managing bank accounts to ensure adequate cash is on hand: that is a liquidity management function – commonly called cash management
This is not about the effective use of cash at hand in terms of short-term investments: that is a treasury function
It is about managing the budget at hand effectively
What is so Important about Cash Management?
Effective cash management creates opportunity for managers to:
Ensure that they remain within budget
Alert senior management to shifts in demand for services or other cost drivers
Maximize the use of their funds so that they are fully expended for their stated purpose and opportunities to meet emerging needs are met
Reallocate within a current year so meet unanticipated needs
A means of assessing departmental, unit and individual performance
To Reiterate: The Objectives of Effective Cash Management
To keep within the appropriated or authorized budget
To have the organizational and resource capacity to reach to changes in plan
To reallocate available funds to meet emerging, short-term priorities.
The Cash Flow Statement: the Basis for Cash Forecasting
The Statement of Cash Flows focuses on the sources and uses of cash for the organization.
Cash Forecasting moves out of accrual to cash: Instead of matching EXPENSES with REVENUES in the period in which they are incurred, now we are concerned with matching CASH INFLOWS and CASH OUTFLOWS in the periods in which they are incurred
Elements of a Cash Management System
Cash flow projections over the budget period: the in-year cash flow or expenditure plan
A system of measuring actual financial performance in relation to the projected plan
Roles and Responsibilities
Senior management must set budgets and program direction
Line managers must manage the resources they are given to carry out programs
To Get to an Adjusted Budget
Take original budget
Apply changes: increases, decreases, etc
Allocate to units and total.
An adjusted budget is not a projection: it reflects decisions and changes subsequent to the original budget