CashCash refers to the fund a firm holds that can be used for immediate disbursement. Cash is a non earning , or idle assets that isrequired to pay bills .*The goal of the cash manager is to minimize the amount of cash the firm must hold for use in conducting its normal business activities, at the same time, to have sufficient cash to (i) pay supplier, (ii) maintain the firm's credit rating, and (iii) meet unexpected cash needs. !easons for maintaining cash".Transaction #alance $ % cash balance necessary for day&to&day operations' the balance associated (ith routine payments ) collections.*.Compensating balance % minimum chec+ing %,C balance that a firm must maintain (ith a ban+ to help offset the costs of services such as chec+ clearing and cash management advice.-..recautionary #alances $ % cash balance held in reserve for unforeseen fluctuations in cash flo(s./.0peculative #alances- % cash balance that is held to enable the firm to ta+e advantage of any bargain purchase that might arise. Cash 1anagement Techniques 23ffective cash management encompasses proper management of both the cash inflo(s ) cash outflo(s of a firm.".0ynchronized Cash 4lo(s2% situation in (hich cash inflo(s coincide (ith cash outflo(s, thereby permitting a firm to hold lo( transaction balances.*.Chec+ Clearing 2 The process of converting a chec+ that has been (ritten and mailed into cash in the payee5s(receiver5s) account.-.4loat 2 The difference bet(een the balance sho(n in afirm5s (or individual5s) chec+ boo+ ) the balance on the ban+5s records/.6isbursement 4loat 2The value of the chec+s that have been (ritten ) disbursed but have not yet fully cleared through the ban+ing system ) thus have not been deducted from the a,c on (hich they (ere (ritten.7.Collection 4loat $ The amount of chec+s that have been received ) deposited but not yet have been made available to the a,c in (hich they (ere deposited %CC38%!%T9:; :4 !3C39.T0".8oc+ #ox %rrangement 2 % technique used to reduce floatby having payments sentto post office boxes located near customers .%rrange a local ban+ to collect chec+s from the post office box, perhaps 0everal times in a day9mmediately deposit it into the company's chec+ing account#y having loc+ boxes close to the customers, a firm may reduce float. *..reauthorized 6ebit0ystem% system that allo(s a customer5s ban+to periodically transfer funds from its account to a selling firm5s ban+ account for the payments of bills. 9f a firm receives regular , repetitious payments from its customers, it might to establish a .60, pre authorized payment