Cash management is the cash collection, payment, and INVESTMENT activities involved in managing a business. This is done with the deliberate goal of minimizing the amount of cash the company has to borrow and maximizing its return from investments. Managers look for ways to hasten the collection of their ACCOUNTS RECEIVABLE, delay the payment of ACCOUNTS PAYABLE, and maximize the investment return of the resultant extra cash. Hastening the collection of accounts receivable entails invoicing customers in a timely and accurate way, upon which the collected cash is hurried into investments. This happens in many different ways. The company must have an efficient way to process deposits. Banks offer a full array of services to speed cash into investments, such as bank lockboxes and sweep accounts. With a lockbox, a company lists the bank’s address on its return envelopes used by its customers. The bank then directly receives all the payments on behalf of the company and immediately records these collections into the company’s bank accounts, making copies of the collected checks and accompanying payment advices available to the company. This is now often done via an INTERNET site to which the company can, at its leisure, do its normal accounting for collections. Lockboxes are especially useful when the company’s customers are widely dispersed. Strategically placed lockboxes minimize the amount of time the company’s MONEY is tied up in the postal system instead of their bank account. Another service offered by banks to maximize the amount of money in investments is a sweep account. The bank monitors needed cash levels in a cash account and then “sweeps” any excess into investments. Often this is done to sweep the account empty each night to get investment income on the otherwise idle cash. To delay cash payments, the company maintains an accurate accounts payable system that carefully schedules payment dates and watches vendors’ grace periods for taking cash discounts and avoiding late service charges. The payment is then made at the last possible moment. At the heart of any cash management system is its cash accounting system and cash budget. Previously the cash account might be reconciled to the bank on a monthly basis, but today’s accountants can download bank statements and reconcile them to the cash account almost daily. This close tracking of the cash account allows the company to keep a smaller cash safety cushion. As part of this focus on cash management, companies have dramatically reduced the number of bank accounts they maintain. This reduces the amount of cash that is tied up as safety balances for all of the accounts, and it allows the accounting staff to focus on the main accounts for the company. Usually a cash budget is prepared as a part of a comprehensive BUDGETING process for the company. The cash budget predicts the inflow and outflow of cash and the resultant cash balances. This enables the company to minimize what it borrows and maximize the amount available for investments, but it involves more than just the simple scheduling of receivables and payables. Instead a good cash management system carefully studies each cash-flow item and determines the best strategy for its effective management. International companies have developed an interesting cash management tool called netting. Instead of settling each transaction individually, where the receivable collected from the international client is collected, translated into the company’s currency, and transmitted back to the company’s main office, the company sets up a netting center where the company’s collections for receivables in a certain currency are used to settle payables in the same currency. A version of this involves a joint-venture netting center where the receipts of one company are used to settle the payables of another. The resulting inter-company receivable/payable is settled between the two companies back in the home country. This solves some currency exchange and currency repatriation problems.