Cash Management and Marketable Securities^217
in shipments as you may be withholding shipments for the payments.
Collection System Costs
Costs of receiving the money from the customers till the time the payments reach the
office and the cost of processing in the office.
Cost of losses from Fraud and Theft
Cash collection could involve frauds and thefts which could negate the effect of excellent
collection systems.
Techniques of Cash Management and Marketable Securities
Cash Concentration Systems
There are three basic tasks of the cash concentration systems:
- Receive Deposits
- Transfer funds to disbursal banks
- Serve as focal point of short term investments and credit transactions
Objective function
Minimise Opportunity cost of excess balance
+ Transaction costs- Savings on dual balances
- Administration costs
- Control costs
Disbursement Systems
Many times the cash is collected from several places where the customers are there
but is disbursed from the factory premises or the corporate headquarters. So the objective
function would be to maximise the disbursement floats available without straining the
relationships with the suppliers.
Objective function:
Maximise + Value of disbursement float
- Loss of discounts for early payment
- Cost of excess balances in disbursement accounts
- Transaction costs
- Value of payee relations
- Value from dual balances