FUND MANAGEMENT

LEARNING OBJECTIVES
After finishing this session, the learner should be able to
1. Set the parameters of what cash is all about
2. Use appropriate bank products for orderly management of fund
3. Understand the internal control measures adopted by persons
handling the cash and the documents and evidence attached to it
4. Detect and resolve common misuses of cash
5. See cash as a potential source of additional income for the
company
 WHAT IS CASH?
Cash is the amount of actual money a business has at its disposal.
Classified on the Statement of Financial Position as a current asset, meaning
it is likely to be used within the next 12 months, and is usually held in bank
accounts.
It has the highest liquidity of all assets because it does not have to be
converted into another form to be used, therefore, highly valued.
Companies can generate cash by selling products from inventory, converting
accounts receivable to cash, selling assets or by raising more cash from
owners.
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 WHAT IS CASH?
Cash may be kept in physical form, digital form, or invested in a short-
term money market product.
It is the lifeblood of a business –
For a company to cover its operating expenses, it needs to have
sufficient money on hand to pay its employees, contractors, vendors, and
suppliers.
Companies also need money to fund capital expenditures and invest in
long term growth projects.

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 WHAT IS CASH?
Cash is bills, coins, bank balances, money orders, and checks.
Cash is used to acquire goods and services or to eliminate obligations.
A related accounting term is cash equivalents, which refers to assets that can
be readily converted into cash.
A business is more likely to retain a large amount of cash on hand if it
routinely deals with cash transactions (such as a pawn shop), and is less
likely to retain much cash if it has an excellent cash forecasting system and
can therefore invest in more illiquid but high yielding investments with
confidence.
Cash is assumed to be stated at its fair value at all times.
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 CASH MANAGEMENT
The process of collecting and managing cash flows from the operating,
investing, and financing activities of a company.
Also known as Treasury Management
In business, it is a key aspect of an organization’s financial stability.
Chief Financial Officers, Business Managers, and Corporate Treasurers are
usually the main individuals responsible for overall cash management
strategies, stability analysis, and cash related responsibilities.
Many businesses fail at cash management and the reasons vary. Typically, a
poor understanding of the cash flow cycle, profit versus cash, lack of cash
management skills, and bad capital investments are the reasons for failing at
cash management.
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 THE NEED FOR CASH MANAGEMENT
1. Cash is at the core of the business operation regardless of
what type and form of business
 Forms of Business Organizations – Sole Proprietorship, Partnership,
Corporation, Cooperative
 Types of Business Organizations – Service (ex schools), Trading (ex
hardware), Manufacturing (ex shoe factory)
2. Cash is the asset that is most susceptible to theft and abuse,
thus, may cause many business failures
3. Cash can be a good source of additional income aside from
normal operation
HOW WELL DO YOU
KNOW CASH?
TYPES OF CASH
1. Cash on hand – this represents the cash collection waiting to be
deposited the following banking day
2. Cash in bank – this represents the cash already deposited in the
bank. This cash in bank can either be
 Savings Account – an account where the money deposited will earn
interest income for the meantime while it is not yet used; evidenced by
a passbook or ATM card.
 Demand Deposit – sometimes called checking account or current
account; does not earn interest; evidenced by a check book.
 Combo Account – combining savings account and demand deposit into
one account.
TYPES OF CASH
3. Cash fund – ideally, company cash has to be maintained under
the imprest system of cash handling. For this matter, the
company has to maintain a certain fund to comply with the
other fund requirements of the company.
 Petty Cash Fund – the fund that will cater the small expenditures of the
company. The person handling this fund is called Petty Cash Custodian.
 Change Fund – the fund used to maintain loose change to address the
concern for small bills and coins. Normally, this is being handled by the
company cashier.
 Dividend Fund – the fund used to pay for the dividends which the
board of directors have declared and payable a time certain in the
future. Normally, this is being handled by the company cashier as well.
 TYPES OF CASH
4. Cash equivalent – these are short term and highly liquid investments
readily convertible to cash and so near their maturity that the present
insignificant risk of changes in value.
Under the generally accepted accounting principles, the following criteria
are set for proper valuation of cash equivalents:
a. If the term is three months or less, such instrument is classified as cash equivalent;
b. If the term is more than three months but within one year, such investments are classified
as short term of temporary investment and should be presented as separate current
assets; and
c. If the term is more than one year, such investment is classified as non-current or long-
term investment. However, if such investment will already mature within a year, then this
will be considered as current asset.
 TYPES OF CASH
4. Cash equivalent – these are short term and highly liquid investments
readily convertible to cash and so near their maturity that the present
insignificant risk of changes in value.
Normally, banks have the following products (interest are paid at
maturity date):
Overnight placements
Weekly time deposits
Monthly time deposits or 30-day time deposits
60 days, 90 days, 180 days, one year, 2 years, 3 years etc.
Trusts
 TYPES OF CASH
4. Cash equivalent – these are short term and highly liquid investments
readily convertible to cash and so near their maturity that the present
insignificant risk of changes in value.
Government Securities (normally interest are paid at placement date and if
ever interest can be received at the placement date, as an investor, you can
maximize your investment by investing also the interest)
Treasury Bills
Treasury Notes
Treasury Warrant
Treasury Bond
 TREASURY BILL EXAMPLE
Our company will place its Php 1 Million in a one-year 8% Treasury Bill at a
bank on March 1, 2023.
Under normal considerations, we can receive the interest on March 31, 2023,
which is the maturity date. But if you will place it in a treasury bill, the
computation will be:
Investment Php 1,000,000.00
Interest at 8% 80,000.00
Total investment Php 1,080,000.00
Thus, the interest will be Php 86,400.00
(Php 1,080,000.00 x 8%)
 TYPES OF CASH
4. Cash equivalent – these are short term and highly liquid investments
readily convertible to cash and so near their maturity that the present
insignificant risk of changes in value.
Commercial Papers (interest are paid based on agreement)
Private company’s bonds issuances
Private company’s commercial papers
 CASH RATIOS
Ratio How to compute Description
Cash Flow Cash & Cash Equivalents + Gauges the firm’s ability to
Liquidity Trading Securities + Cash flow pay current financial
Ratio from operating activities / obligations by considering
Current liabilities cash and other cash
equivalents

Days Cash Average Cash Balance / Cash Indicates the ability of the
Operating Costs / 365 days firm to pay the average
or 360 days daily cash obligations
 CASH RATIOS
Average Cash Balance is adding money received and subtracting
money spent.

Cash Operating Costs means, for any period, all cash costs of the
business relating to the operation of a project (all expenses
except debt service paid).
How to compute:
Total Operating Costs = COGS + OPEX
 CASH RATIOS
Ratio How to compute Analysis
Cash Flow 9,732 + 229 + 5,663 / 53,328 = 0.29 ???
Liquidity
Ratio A ratio less than 1 indicates short-term cash flow problems; a ratio
greater than 1 indicates good financial health, as it indicates cash
flow more than sufficient to meet short-term financial obligations.

Days Cash -5.5 / 204,125 / 365 days = - 0.00000007 ???

days

This is a measure of a system’s financial security. In essence, this is

how much cash a system has saved up that isn’t earmarked for
anything else (unrestricted cash) and estimates the number of days
the system can pay its daily operation and maintenance costs
before running out of this cash.
NOTE!
The breakdown of the cash & cash equivalents are: cash
on hand, cash in banks, cash fund, and investments with less
than one year maturity.

Cash in bank with negative balances will not be included

as these will be shown as part of current liabilities and not
assets.
CASH MANAGEMENT EXAMPLE – COMPANY A
1. All collections will be deposited in one account for control purposes. The
account is a combo account which is very convenient because it is documented
with a passbook, which will show the deposits made and the checks that
cleared for the day.
2. A Daily Cash Position Report (DCPR) is maintained to know how much
collection were still undeposited and how much of the checks issued were still
unreleased as well as how much were not yet encashed (outstanding checks).
With these information, excess cash can be calculated.
Book Balance Php 500,000
Less: Deposit for Clearing 20,000
Balance Php 480,000
Add: Unreleased Checks 50,000
Actual cash balance Php 530,000  excess cash is Php 30,000
if maintaining balance is at Php 500,000
3. Excess cash will be placed in an overnight time deposit.
4. Excess cash can be placed in weekly time deposit or monthly, and to some
extent long term placements.
HOW DO WE VALUE CASH?
HOW DO WE VALUE CASH?
Cash is valued at face value.
For cash denominated in foreign currency, this should be
converted to current rate (the rate on the last banking day at
the end of the accounting period).
Dollar Account $350,000
Rate, last banking day Php 48.00 per US Dollar
Peso Equivalent of Dollar Account Php 16,800,000
 HOW DO WE
DOCUMENT CASH?
 DOCUMENTING CASH IS ESSENTIAL FOR IT IS IN THIS WAY THAT WE ARE
ASSURED THAT IT IS PROPERLY DOCUMENTED WITH EVIDENCE TO SUPPORT
THE TRANSACTIONS AS IT IS ENTERED IN THE BOOKS OF ACCOUNTS.
Provisional Receipt – normally issued by collectors, whether cash or check collection. This
should be surrendered by the collector to the office cashier every day.
This will also be issued in triplicate by the office cashier in case of check payments (needs
to be cleared). Original copy given to the person paying. Duplicate given to the cashier
together with the collector’s remittance form. Triplicate will be left in the booklet for
reference.

Official Receipt – issued by the office cashier for cash payments. This will also be issued
whenever the collector remits the cash collection to the office cashier.
This will also be issued in triplicate for check collections for which a provisional receipt was
issued having passed the check clearing period. Original copy to the person paying.
Duplicate given to the accounting department for recording. Triplicate will be left in the
booklet for the cashier’s copy.
Kristine Joyce Enterprises
210 Worth Drive, SAVVY 25 No. 089
Km 18, Paranaque City
TIN 000-123-456-000 Date: _____________
PROVISIONAL RECEIPT
Received from ____________________________________________________________
the amount of ________________________________________ (Php _______________)
as partial / full payment of ________________________________________________ .

Form of Payment
Cash Received by:
Check _____________________________
Authorized Name and Signature
Kristine Joyce Enterprises
210 Worth Drive, SAVVY 25 No. 101
Km 18, Paranaque City
Proprietor: Kristine Joyce Guzman
TIN 000-123-456-000 Date: _____________
OFFICIAL RECEIPT
Received from ____________________________________________________________
the amount of ________________________________________ (Php _______________)
as partial / full payment of ________________________________________________ .

Form of Payment
Cash Received by:
Check _____________________________
Authorized Name and Signature
 DOCUMENTING CASH IS ESSENTIAL FOR IT IS IN THIS WAY THAT WE ARE
ASSURED THAT IT IS PROPERLY DOCUMENTED WITH EVIDENCE TO SUPPORT
THE TRANSACTIONS AS IT IS ENTERED IN THE BOOKS OF ACCOUNTS.
Sales Invoice – ordinarily considered as cash sales invoice but there are businesses which
uses this for credit sales or sales on account.
This is issued in triplicate – original to the customer, duplicate to the accounting
department, and triplicate will be left in the booklet for the cashier’s copy.

Daily Collectors Remittance Form – a summary of the collection made by a specified

collector for the day. This is submitted to the office cashier together with the duplicate
copy of the provisional receipt.

These business forms and documents are just a few of the many forms and documents
adopted by an ordinary company. As the company grows bigger, there will be more forms
and documents depending on the need to control cash.
Kristine Joyce Enterprises
210 Worth Drive, SAVVY 25 No. 0001
Km 18, Paranaque City
Proprietor: Kristine Joyce Guzman
TIN 000-123-456-000 Date: _____________
SALES INVOICE
Sold to _________________________________________________________________
Address ________________________________________________________________
Units Particulars Unit Cost Amount

Received the above order in good condition

Also called Cash Sales Invoice / ___________________________________
Charge Invoice / Service Invoice /
Invoice Name and Signature of Customer
Kristine Joyce Enterprises
210 Worth Drive, SAVVY 25
Km 18, Paranaque City Date: _____________

DAILY COLLECTORS REMITTANCE FORM

Collector’s Name _______________________________________________________________________
Area Coverage ________________________________________________________________________
Reference No. Particulars Form of Payment Amount

Remitted by: Checked by:

________________________________ ___________________________________
Name and Signature / Date Name and Signature / Date
SOME TIPS IN FORMATTING FORMS AND
DOCUMENTARY EVIDENCE
1. What are the necessary information to address control measures –
date, serial number, purpose, is it thru manual operation or mechanical
operation
2. How big will these forms be?
3. Filing
4. Distribution
5. The responsible employees who will handle it
The bigger the cash, the bigger the risk and the more control measures should be
implemented.
NOTE!
All documents must be registered with the Bureau of
Internal Revenue and this must be kept by a responsible
officer of the company to avoid misuse or using it
maliciously for one’s personal gain.

The knowledge of the organizational chart is vital for

stronger cash management.
HOW IS CASH HANDLED?
PEOPLE HANDLING CASH
Collector
Cashier
Junior Accountant
General Accountant
Accounting Supervisor
Internal Auditor
 Position : COLLECTOR
Directly reporting to : CASHIER / FINANCE & TREASURY MANAGER
Daily Duties:
1. Reviews the accounts receivable that are due for collection on that day.
2. Follow ups thru phone calls/email.
3. Issues provisional receipts to customers who paid their respective accounts.
4. Remits collections to the office cashier together with the daily remittance form
fully filled out.
Responsibilities:
1. Early or on time collection of the various accounts entrusted to him for
collection.
2. Report to the supervisor about the customers who are difficult to collect from.
3. Report any feedback from the customer so management can address the
concern as early as possible.
 Position : CASHIER
Directly reporting to : FINANCE & TREASURY MANAGER
Daily Duties:
1. Issues official receipts to all cash received by the company.
2. Issue official receipt to all check deposits made by customers.
3. Deposits all cash collections up to 12noon, within the day and all cash collections
after 12noon, the following banking day.
4. Prepares the daily cash position report.
5. Payments from the entire fund he/she is entrusted to keep.
6. Requests replenishment of fund within the policy set.
Responsibilities:
1. Safe keeping of the cash collection.
2. Good relationship with bank personnel.
3. Maintenance of all fund entrusted. Files to maintain:
4. On time release of all check payments. 1. Copy of the daily cash position
5. Placement of short-term investments. report
6. Termination of short-term investments. 2. Copy of the validated deposit slip
 Position : JUNIOR ACCOUNTANT
Directly reporting to : ACCOUNTING SUPERVISOR / FINANCE & TREASURY MANAGER
Daily Duties:
1. Receives report from cashier.
2. Journalizes the cash receipts as evidenced by the daily cash position report.
3. Have it checked by the internal audit group and approved by the accounting supervisor.
4. After approval, forwards the cash receipt journal to the general accountant for the recording of the
transaction.
5. Prepares the check voucher for payment of various accounts of the company. This will include the
required routinary government contributions such as SSS, Philhealth and Pag-ibig.
6. Have it checked by the internal audit group and approved by the accounting supervisor.
7. After approval, forwards the check voucher and the check payment to the cashier for proper release
procedure.
Responsibilities:
1. All vouchers whether receipts or payments are done during daytime otherwise, file it in the unfinished
work file so that in case the staff is on emergency leave, work can be done by other members of the
accounting department.
2. Report all problems to the accounting supervisor so that the concern can be addressed properly.
Files to maintain:
Copy all the vouchers prepared for reference and audit.
 Position : GENERAL ACCOUNTANT
Directly reporting to : ACCOUNTING SUPERVISOR / FINANCE & TREASURY MANAGER
Daily Duties:
1. Recording of transactions in the various books of accounts of the company
Periodic Duties:
1. Prepares the trial balance.
2. Prepares the working paper.
3. Prepares the financial statement.
4. Prepares the bank reconciliation statement.
5. Prepares suggested adjusting entries, have it checked by internal audit group and approved
by the authorized officer of the company.
6. Prepares Certification of SSS, Philhealth and Pag-ibig Contribution of the employees once
requested.
Responsibilities:
1. All entries made in the books of accounts are checked and approved by authorized officers of
the company.
Files to maintain:
1. Books of accounts
2. Original vouchers and documents
3. File of SSS, Philhealth and Pag-ibig Contributions
 Position : ACCOUNTING SUPERVISOR
Directly reporting to : FINANCE & TREASURY MANAGER
Daily Duties:
1. Supervises accounting department personnel.
2. Approves all vouchers prior to entry in the books of accounts.
3. Analyzes the various reports coming from various departments to countercheck
the reports generated by the accounting departments.
Periodic Duties:
1. Checks accounting reports.
2. Reports the result of operations to the Board of Directors.
Responsibilities:
1. Financial Reporting
2. Tax Reporting
Files to maintain:
1. Accounting Reports
2. Income Tax Payments
 Position : INTERNAL AUDITOR
Directly reporting to : PRESIDENT
Daily Duties:
1. Checks the documents coming from the cashier and from the Junior
Accountant.
Periodic Duties:
1. Conducts post audit of the documents and reports.
2. Conducts compliance audit. This is an audit check on the compliance of the
existing system of internal control installed by the company.
3. Evaluates certain internal control mechanisms for enhancing its operation
and asset safely.
Responsibilities:
1. See adherence of all policies and procedures by various personnel of the
company.
2. Asset protection.
 AFTER KNOWING THE ENVIRONMENT OF CASH, HERE ARE CONTROL
MECHANISM TO AVOID ABUSE AND MISUSE OF CASH IN A COMPANY:

The VP for Finance should establish the policy on cash handling.

From the policy established, the head of the accounting department
should prepare the procedure.
The implementation of the procedure is subject to the review and
audit by the internal audit group or department so that continuous
improvement on the control mechanism may be done to address the
continuous and fast changing technology of the company.
 CASH HANDLING PROCESS FLOW
Collectors collect the receivable of Customers, as an alternative, may
the company pay directly to the office

The Cashier receives the money

from collectors and customers

The Junior Accountant will

Depository Bank
journalize the receipt transactions

The General Accountant will record the

The Accounting Supervisor will check the
transaction. He will receive the bank
entry and later on check the bank
statement and prepare the bank
reconciliation statement
reconcialiation
HOW IS CASH PROCESSED? The policy set up must
feed back potential
errors to management.
 POLICY OF CASH HANDLING
1. The company should adopt the imprest system of handling cash.
2. The company should maintain the combo account for easier tracking of banking transaction.
3. The company should place its money in various banking companies so as to distribute the
risk involved in banking.
4. The following bank signatories will be observed:
a) If the amount of the disbursement is P50,000 and below – The Comptroller or Accounting Head to be
countersigned by the Treasurer or VP Finance
b) If the amount of the disbursement is more than P50,000 – The Comptroller or Accounting Head to be
countersigned by the Treasurer or the President

5. Official receipts can only be issued when cash is received. Check payments received from
customers or other person or company will be covered by provisional receipts.
6. All funds should be kept and maintained by the office fund custodian. For the petty cash
fund, the custodian should request replenishment once the fund is at least 40% used to
avoid disruption of operations due to insufficiency of the fund.
 PROCEDURE IN CASH HANDLING
1. The cashier upon receiving cash from the customer or the company collector
will issue an official receipt.
2. The cashier will also issue an official receipt for check deposits that are
already cleared in banking system.
3. The cashier will deposit the cash collection up to 12noon of the current day
intact within the day and money collections after 12noon will be deposited
intact the following banking day.
4. The cashier will then prepare the daily cash position report.
5. The official receipt issued together with the validated deposit slip and the
original copy of the daily cash position report will then be forwarded to the
accounting department for file and the preparation of the appropriate
accounting entries and for eventual entry in the books of accounts.
COMMON MISUSES OF CASH
 COMMON MISUSES OF CASH
1. LAPPING – This is a case of misappropriating a collection from one customer and
concealing this defalcation by applying a subsequent collection made from another
customer.
This involves a series of postponements of entries on collection of a receivable
and is made possible because of poor internal control. Example, the record keeper is
also handling cash or a connivance of the cashier and the record keeper.
2. KITING – This happens when a check drawn from one depository bank and
deposited in another bank at the end of the month or year. There will be no entries
made on this drawing and depositing. As a result, the cash in a depository bank
increases to cover the shortage while on the other depository bank, it has not yet
posted the check deposited to the other bank. Again, this happens because of poor
internal control. Poor control can be attributed to poor cash management.
3. FRAUDULENT DOCUMENTS AND EVIDENCE – Some employees will make
documents and pieces of evidence which are not really true.
HOW IS CASH CONTROLLED? Managing cash means
control and direction.
SOME GOOD PRACTICES IN MANAGING CASH
1. Establishing good relationship with the bank officer – a key to
getting better interest rates in time deposits.
Some banks offer very short-term time deposit investments like:
A. Overnight placement – place excess money during the day to an
overnight placement and terminate it the following day.
B. One week time deposit placement – excess money could earn
more while waiting for releasing of check payments to creditors
and payees.
SOME GOOD PRACTICES IN MANAGING CASH
C. Enter into a 30-day short term investment – depending on the cash
needs of the company, can either get a treasury bill or warrant or note.
Three basic differences between a time deposit and government notes:
 Time deposit is a bank product, hence, its liability; government securities
are government products and are liabilities of the government
 Time deposit is covered by the Philippine Deposit Insurance with
coverage of up to 500,000 while government notes are liabilities of the
government.
 The interest of a time deposit can be received at the maturity date
while that of a government security can be received at the date of
placement.
SOME GOOD PRACTICES IN MANAGING CASH
2. Identifying the various books where these cash transactions were
recorded in comparison with the various reports prepared.
3. Routine audit procedures to countercheck the books and reports there is
the employees’ duties, so that there will be no overlapping of functions
and strict adherence to company’s policies and procedures.
4. The preparation of strategic planning (1-2 years planning).
5. The preparation of a medium-term development plan (3-5 years).
6. The preparation of a long-term development plan (more than 5 years)
 Maintaining good

INDUSTRY PRACTICE relationship with the

bank could benefit the
company in many
ways.
INDUSTRY PRACTICE
Bills purchased is a form of discounting, but can be waived if with good
relationship with the bank. This means that the bank can make your check
deposit good a cash deposit and can be used immediately for operations.
Earmarking or Confirmation of Deposit is when you have doubts on the
dated check you are holding on whether it is funded or not so you call the
bank and ask to confirm the check.
Bouncing Check means that the check you received was not funded and
therefore will not be cleared in the banking system.