WHAT IS CASH MANAGEMENT? Definition, Goals & Common Features.

fidelity cash management, robinhood cash management and mandiri cash management

All humans on earth do transactions that involve cash on a daily basis, and miscalculation of it brings up problems between the two parties involved. Here is a key fact to know about cash management accounting and some brokerage companies like Fidelity, Mandiri, and Robinhood.

Cash Management 

Cash management is the process of collecting and managing cash flows. It can be important for both individuals and companies. In business, it is a key component of a company’s financial stability. For individuals, cash is also essential for financial stability and is usually considered part of a total wealth portfolio. Individuals and firms have a wide range of offerings available across the financial marketplace to help with all types of cash management needs. Banks are typically the primary financial service providers for the custody of cash assets. There are also many different cash management solutions for individuals and companies. Especially, for those seeking to obtain the best return on cash assets or the most efficient use of cash comprehensively.

Treasury management is also another name for cash management, which is the process that involves collecting and managing cash flows from the operating, investing, and financing activities of a company. In business, it is a key aspect of an organization’s financial stability. Financial instruments involved in managing cash include money market funds, Treasury bills, and certificates of deposit.

As a matter of fact, in an organization, chief financial officers, business managers, and corporate treasurers are usually the main individuals responsible for overall cash management procedures, stability analysis, and other cash-related responsibilities. However, many organizations may outsource part or all of their cash management responsibilities to some service providers. Precisely speaking, the primary goal of managing cash in a firm is to trade-off between liquidity and profitability in order to maximize long-term profit. This is possible only when the firm aims at optimizing the use of funds in the working capital pool.

The Goals Are

  1. To satisfy day-to-day business needs,
  2. To provide for scheduled major payments
  3. To face unexpected cash drains
  4. To seize potential opportunities for good long-term investment
  5. To meet the requirements of bank relationships
  6. To build an image of creditworthiness
  7. To earn on cash balance
  8. To build a reservoir for net cash inflow till the availability of better use of funds by mindful planning
  9. To minimize the operating cost of cash management.

The cash flow statement is the main component of a firm’s cash flow management. The cash flow statement comprehensively records all of the organization’s cash inflows and outflows. It includes cash from operating activities, cash paid for investment activities, and cash from financing activities. The bottom line of the cash flow statement shows how much cash is readily available for an organization. The cash flow statement is divided into three parts: investing, financing, and operating activities. The operating part of cash activities is basically the net working capital, which is presented on the cash flow statement as a firm’s current assets minus current liabilities. Businesses strive to make the balance of the current assets exceed the current liability balance.

Evidently, the other two parts of the cash flow statement are rather more straightforward, with cash inflows and outflows connected to investing and financing, such as investments in real estate, buying new equipment and machinery, originating stock repurchases, or paying out dividends as part of the financing activities. There are many internal controls to use in managing and achieving efficient business cash flows. Some of a business’s major cash flow considerations comprise the average length of account receivables, write-offs for uncollected receivables, collection processes, rates of return on cash equivalent investments, liquidity, and credit line management.

Cash Management Accounting 

Cash accounting management is the process of optimum utilization of cash for ensuring liquidity and profitability and includes proper collection, investment, and disbursement of cash. The primary asset used by companies to settle their obligations on a regular basis is cash. Cash accounting is an accounting method where you record payment receipts during the period in which they are received and also record expenses in the period in which they are actually received. In other words, revenues and expenses are recorded when cash is received and paid. Cash management accounting is also called cash-basis accounting and may be contrasted with accrual accounting, which recognizes income at the time the revenue is earned and records expenses when liabilities are incurred regardless of when cash is actually received or paid.

Common Features Of Cash Accounting 

  • Cash accounting is simple and straightforward. Transactions are recorded only when money goes in or out of an account.
  • Cash accounting doesn’t work as well for larger companies or companies with a large inventory because it can obscure the true financial position.
  • The alternative to cash accounting is accrual accounting, where trades are recorded as revenues are earned and expenses are incurred, regardless of the exchange of cash.

Furthermore, Cash accounting management is one of two forms of accounting. The other is accrual accounting, where revenue and expenses are recorded when they are incurred. Small businesses often use cash accounting because it is simpler, more straightforward, and it provides a clear picture of how much money the business actually has on hand. When transactions are recorded on a cash basis, they affect a company’s books with a delay from when the trade is consummated. As a result, cash management accounting is often less real than accrual accounting in the short term.

Fidelity Cash Management Account

The Fidelity Cash Management account is technically a brokerage account. This means it’s not a bank account and doesn’t have the same rules that a bank would have. The FDIC insurance that Fidelity offers come from the partner banks with which Fidelity works. As is the case with most cash management accounts, Fidelity “sweeps” its customers’ deposits into these banks, and the deposits are given FDIC insurance by extension. Also, Fidelity’s Cash Account is a versatile cash account offering grades similar to those found in checking and savings accounts. With this account, you can save, spend, and invest. The account has no minimum balance requirements and no monthly upkeep fee.

You’ll also get free standard checks and a debit card. You can pay bills using your checkbook or set up a Fidelity BillPay account to make mobile bill payments. Speaking of mobile, you can also deposit checks into your Cash Management Account through Fidelity’s highly rated mobile app. And, Customers can also connect their accounts to several popular payment apps, like Venmo and PayPal. You can also connect your debit card to digital wallets like Apple Pay and Google Pay. The sweep program allows for cash management deposits into accounts at multiple banks. It also helps Fidelity to protect deposits in its cash management account far beyond a standard bank account.

Fidelity Offers Several Customer Investments and Products and Services, This Includes:

  • Brokered CDs
  • Credit cards
  • Life insurance
  • Retirement accounts
  • sector investing
  • Managed account services
  • Wealth management
  • Financial coaching
  • Annuities
  • Health Savings Accounts (HSAs)
  • Mutual funds
  • Stocks
  • Bonds
  • Options

Interestingly, Fidelity Cash Management certainly offers several benefits that make it an attractive alternative to a traditional checking account. It’s especially useful for individuals who already have a relationship with Fidelity since it’s possible to move money between the two accounts quickly. Unfortunately, Fidelity’s Cash Management Account earns very little interest. It’s a good alternative to an everyday checking account but not a substitute for a high-yield checking or savings account. Compare your banking needs to what Fidelity Cash Management Accounts offer to determine if this account is right for you. The Fidelity Cash Management Account is a brokerage account that is an alternative for individuals seeking FDIC insurance that is available for your everyday spending and short-term investing needs with the benefits of a traditional checking account, including:

  1. A full suite of spending and money movement components is available via the Web or your mobile device.
  2. Cash balances earn interest and are eligible for FDIC insurance.
  3. FDIC insurance coverage that is automatically maximized via our FDIC Deposit Sweep Program 
  4. Access to short-term investments such as money market mutual funds and CDs
  5. The ability to link the Fidelity Cash Management Account to your other Fidelity accounts or your other bank or investment accounts, for the purposes of more easily moving money between accounts,
  6. No minimum to open and no monthly maintenance fees.

Mandiri Cash Management.

Mandiri Cash Management is an internet-based electronic application aimed at helping companies in the wholesale segment conduct their financial operations. By using a secure connection network, Mandiri cash management provides greater convenience in monitoring bank accounts and conducting various types of financial transactions. When it comes to cash management, Mandiri Bank has clients ranging from state-own enterprises, local governments, and high-growth customer groups such as e-commerce companies, and drives the core of its business strategy through customization and empowering clients to transact with ease. The Mandiri business franchise offers a lot of features across its 27 cash products, helping it to bundle and support end-to-end cash management solutions across bill collection, interbranch notional pooling, host-to-host payment, and card spending. The bank maximized its revenue by informing them about risk relief to drive long-term sticky relations.

Robinhood Cash Management

Robinhood cash management, or financials, is an online brokerage firm that allows investors to trade stocks and securities without any commissions. One of the key goals of Robinhood is to remove the barriers to entry for individual and retail investors so that they can access the financial markets. In Robinhood cash management, they charge no commissions since the firm earns its profits from a process called “payment for order flow.” When Robinhood sends their trades and order flow to firms, called market makers, they get compensation as pay. Market makers are firms that buy and sell securities, usually from other firms, who then enable the flow of buying and selling of securities in the market by quoting or making the buy (bid) or sell (ask) prices.

Altogether, Robinhood offers a cash management feature that is similar to owning a checking or savings account. The account pays a 0.30% annual interest rate, and there are no monthly service fees or minimum balance requirements. Although there are many similarities to a checking or savings account, there are some specific differences between Robinhood Cash Management and traditional bank accounts.

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what si robinhood cash management

Robinhood Financial is an online brokerage firm that allows investors to trade stocks and securities without any commissions. One of the key goals of Robinhood has been to remove the barriers to entry for individual and retail investors so that they can access the financial markets.

what is the basic cash management techniques

Basic cash management procedures are financial strategies that many business owners use to keep track of all the money involved in their businesses or firms. This can include profits, expenses, and debts.

what are the goals of cash management

  • To satisfy day-to-day business needs;
  • To provide for scheduled major payments;
  • To face unexpected cash drains;
  • To seize potential opportunities for good long-term investment;
  • To meet requirements of bank relationships;
  • To build an image of creditworthiness;
  • To earn on cash balance;
  • To build a reservoir for net cash inflow till the availability of better use of funds by mindful planning
  • To minimize the operating cost of cash management.