Developing a Strong Cash Management Procedures Manual

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Article by Leslie N. Masonson, CCM
Reprinted with permission from The Financial Management Network.

Many companies do not have a detailed, up-to-date and well-written cash management procedures manual. Only an estimated 60% of large companies have this manual, while 20% of smaller companies have one. This oversight can prove costly in case of a fraud, disaster, or other difficult situations.

The process of creating a cash management procedures manual is time-consuming, people intensive, and difficult to keep current. These characteristics are insignificant, however, when compared with the problems that can arise when you don't have one. Since the majority of cash management departments operate as a "cost center" with limited personnel, they do not always get sufficient budget dollars, data processing assistance, or internal systems priority. Thus, the cash manager has to somehow develop the manual on his/her own. Because of other pressing matters, he/she will usually allocate a lower priority to this project than those of managing the daily functions. That is a mistake that should not be made.

Most companies do not have and have not considered preparing a written cash management procedures manual for handling their day-to-day cash management activity. The individuals responsible for managing the daily cash flows use their own individually designed methods of tracking the pertinent information; calculating the daily cash position; and posting, inputting, or sending the accounting entries to the appropriate departments for further action.

Follow These Steps in Creating a Manual

  1. Meet with each person in the cash management department, including the supervisor, to obtain an overall view of each person's functions, responsibilities, and insights. A broad picture of how today's procedures are currently being handled provides input for the next step.
  2. Meet with each person in a one-on-one discussion to review in detail his/her day-to-day activities. Included in this review are all the forms, reports, internal documents, and internal and external information and data sources used to manage the function. One approach is to review each processing step according to the time of day it is performed. This provides an excellent indicator as to the time pressures involved. Another approach is to review the activities by grouping functions separately, such as collections, disbursements, concentration, and investment/borrowing.
  3. Create a master flow chart of all the cash management activities in order of performance, as well as indicating the timing and forms/reports required to accomplish each step. The flow chart should be prepared in its simplest form with a few key words in each box, while the detailed narrative description is placed on adjoining pages.
  4. Meet with the internal departments that interface with treasury to determine how they pass information back and forth. Typical departments include accounts receivable, accounts payable, purchasing, payroll and MIS. Determine exactly what information is exchanged, its purpose, and the time deadlines.
  5. Consolidate and review the information obtained so far. The flow chart should be adjusted as necessary based upon the information obtained from the internal departments.
  6. Develop a flow chart for each specific job function in the treasury department. This can be easily obtained from the master flow chart. The accuracy of the flow chart should be verified by each person performing the function, as well as with the supervisor. Obtain written sign-offs on each page after any corrections are made. As a quality-control measure, different individuals than those who normally perform the function should review the draft procedures and attempt to perform the functions as specified. Any ambiguities should be corrected.
  7. Place all the flow charts and narrative descriptions in a binder with three sections. Section 1 should contain the master flow chart and narrative description of the process. Section 2 should contain the flows by job function. Lastly, Section 3 should contain the Appendix. This would contain all blank forms, reports, and internal documents, as well as a set documents completely filled out with real data for a day or two to show the exact manner in which incoming and outgoing information is handled. There should also be an accompanying description in words indicating where the information is obtained from, where it is to be placed on the forms, and how to prepare all reports. The more detail the better.
  8. Before the manual is printed in final form, the next step is to have a person unrelated to treasury take the manual and perform the cash management for the day for each separate job or function over several days. If this person has difficulty following the manual, then the confusing elements should be reworked until it is clearly understood.
  9. Once the manual has been printed in its final form, it should be reviewed by the cash manager, assistant treasurer, treasurer, and internal and external auditors. The company's attorneys should also review it from the legal and risk perspective.

-- Leslie N. Masonson, CCM is President of Cash Management Resources, a treasury consulting firm. He can be reached at (914) 783-1231 or at [email protected]

The Financial Management Network is an online resource for financial management issues, providing CPE and feature news to Industry accountants. Visit their website at

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