Accounting Best Practices, Fifth Edition

Summary

This chapter is unusual in that none of the best practices presented are mutually exclusive, nor are any of them especially difficult to implement, and most can be created at low cost. As a result, this is a prime area for an accounting manager to explore in order to achieve the highest possible level of cash management efficiency. Best of all, efficiency in this area directly equates to having more cash available for investments, which has a direct impact on company profits—one of the few functions covered in this book in which corporate management can see an immediate and measurable impact as a result of implementing best practices.

Given the high visibility of implementing cash management best practices, it is important to install as many of them as possible. In particular, there should be a set of lockboxes in place that will reduce the mail float from customers, as well as consolidation accounts that accumulate funds from the lockbox accounts and move them to the central bank account. There should also be zero-balance accounts to handle cashed payroll checks, and a controlled-disbursement account for paying suppliers. If this array of bank accounts is in place and is properly managed, there should be a noticeable increase in the average amount of funds on hand that can be profitably invested.