personal cash management policies and practices. The paper starts with by stating the methodology through which the content was collected for the relevant literature in the paper. The paper then presents a clear definition of what cash management is and presents an overview of some of the most utilized personal cash management practices. The literature review also presents numerous internal cash management policies and practices that can prove to be feasible and profitable on the personal level. The paper concludes with an overview of all the facts discussed.
In order to collect relevant data for the results, concise and yet comprehensive information related to the topic have been compiled from articles published online individual researchers, practitioners, as well as, international research institutions. The aim of the study is to critically review the strengths and weaknesses of both conception and implementation of research pertinent to our topic -- Cash Management. This section also aims to present new questions raised by the research and their potential for future enquiry. The keywords used to collect data had been, "personal cash management," "cash management practices," "cash management policies."
As mentioned above, factors affecting personal cash management decision use are several, but only the most relevant ones will be discussed in this thesis so that the relevancy of the argument can be sustained throughout the paper. The text puts forward concepts, theories, fundamentals, principles, strategies and tactics that are utilized by international institutions. This literature review will include only those studies which (1) were confirmed to be of cash management practices, and (2) were confirmed to be of cash management policies.
Evaluation of the data will be based on calculating the intended affect or the outcomes/results of the study. The method used to measure the results of the study will be the same as those found in other research synthesis studies. The writer will also look into the process with which the results are obtained so that limitations in the methods can be determined and improvements can be suggested.
Cash management can be simply defined as strategy to handle the liquid working capital of a company or a country. Hence, all policies that revolve around cash transactions and financial breakdowns are considered part of the cash management models all over the world. In a majority of the developed world, the government takes charge of the majority of its banking and cash management activities through the accounts that they have in the Central Bank. Even though, the Central Bank acts as part of the treasury for the government, it is important to note that it does not actually have any part to play in the overall management of cash expenditure or decreasing the overall costs incurred by the government (Bari, 2000).
However, when talking about personal cash management structures, there is clearly a deficiency of a prescribed and designated task force that can execute and sustain good cash management policies. This is perhaps why there seem to be very few alternatives available for creating cash flow or sustenance to fulfil the short-term requirements for a majority of the individuals who do not have stock in the government or corporations. This is primarily true for those individuals who are living on a cheque-to-cheque lifestyle and have little to no personal financial plans. Another aspect that is obvious is most of the heavily indebted individuals seem to be the least motivated and interested in the investment and maintenance of an efficient structure of personal cash management. This is perhaps why we see imbalanced payments and receipts for those who are indebted. What this also does is leave insufficient methods of payments as well as little control over the functioning of the bank accounts and cash flow that they generate from one cheque to the next (Bari, 2000).
Hence, looking at the overall situations for personal cash management strategies, the following suggestions are necessary to implement: consistently monitor and manage the overall costs and revenues balance with respect to the personal finance earned and owed on a quarterly or yearly basis (preferably yearly); one way to ensure that cash management is effective will be by making sure that all the cash flow meets the general lifestyle necessities more manual input on the cheques as well as cash transactions made on a day-to-day basis (Bierman and Macdams, 2001).
Internal Cash Management Benefits for Personal Financial Planning
Exercising efficient internal controls is vital for all relevant sections of personal and corporate cash management primarily due to the multifaceted temperament of the progression revolved around cash management procedures namely processes like simple bill payments, cash deposit or collection, as well as the disbursement procedures (Michel, 2001). Daily cash management at personal and corporate levels also includes the uneven distribution of tasks at the administrative branch that are normally associated with the completion of the aforementioned processes (Bierman and Macdams, 2001). Some aspects that can ensure efficient cash management procedures at the personal and corporate levels include the following:
a. The frequency of an increased level of turnover ratios of the work staff, functioning managers as well as investors in the cash management departments;
b. The delegation of all cash management strategies and execution to those individuals who have a vast experience in financial breakdowns (Bierman and Macdams, 2001); as well as
c. The segmentation of billing and cash managements tasks that complement the efficiency of the monitoring functions (Michel, 2001)
A majority of the personal cash management transactions in the United States are handled by the Department of Commerce. The primary task of the Department of Commerce is to create and implement efficient cash management policies that will reduce the overall expenditure costs for the working individuals. Furthermore, the most efficient policy of personal cash management that individuals look for is the assurance that their liquid assets will be safe from any form of wastage, loss, illegal exploitation or embezzlement. It is also important to note here that internal controls can seem restrictive when dealing with personal cash management structures but they are extremely necessary as through internal controls, one can very easily employ experienced financial managers who add value and innovation to the entire process and make the individuals feel more confident in their personal financial plans. This further ensures that the individuals will look for customized results and hence take active part in the control of the cash flow at their end as well (Chiumintto, 2001).
On the other hand, it is also important to note here that the overall pros and cons of the specified market or cash situations have to be assessed before and after application of any and all personal financial plans. This has to be done to ensure that the overall benefits outweigh the costs and the application of the strategy is most appropriate for the stations that the individual is facing at the local and communal level. However, care has to be taken that these assessments are not used as tools of excuse to ease up on the overall execution of financial plans and management strategies or overlook possible profits from the execution of a policy if it initially incurs break-even situations for the individual (Gitman et al., 2010). For example, a great education financial plan will most likely reap minimal to no results for the parents who invest money in it for the first five years. This might discourage some parents from investing in the plan but the internal controls should be such that they make these parents see that the profits will come in dividends in the long run and the plan will only benefit them.
The fact of the matter is that internal controls for personal cash management are necessary for all individuals. Most of the most effective personal cash management strategies cannot be implemented without a proper structure of the internal control that employs not just financial managers but also the specific responsibilities being handled by employees who have a specified set of abilities. The important aspect about personal cash management here is the level of communication and two-way guidance that the managers and employees have amongst and between each other as well as with the individuals who invest in personal financial plans. Once the relationship becomes mutually respectful and coordinated, personal cash management tactics like cash deposits or collections, expenditures, and holdings that the company/employee and individuals are personally responsible for become far more coordinated. Hence, personal cash management can be at its best if and when the organizational managers employed in the cash management unit are not only experienced in what they do but have an eye to hire and delegate responsibilities to those individuals who will be able to execute target and sustain the achievement of the personal goals of individuals over the long-term (Gitman et al., 2010).
When talking about intangible strategies that can be employed in personal cash management, the most common aspect is the use of common sense to understand the overall demand ratio as well as the performance…