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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Cash Management: A Tutorial for Local Governments and School Districts

Module 1: Speeding Up the Collection and Deposit of Receipts

One way to improve your cash management system is to speed up the collection and deposit of receipts. The amount of time between collection and deposit affects interest earnings, and once deposited, funds may be able to be used for investment in higher earning instruments, such as certificates of deposit. Certain receipts, such as recreational fees, are more likely to be held for longer periods before they are deposited. When the amount received is significant, there is a greater potential for increased interest earnings.

Another way to improve your system is to receive your major revenues by wire transfer. Receiving your major revenues by electronic funds transfer (EFT) will cut down on the collection and deposit time. Currently, most governmental agencies are offering EFT options to local governments for the receipt of funds. Check with the government agencies from which you receive money and your local bank representative on how to proceed with EFT.

A third way to improve your system is to use a lock box for the collection of real property taxes or other significant revenues. This is one of the best remedies to eliminate the concern that departments or activities may not be making timely deposits. Initially, payments are sent to a lock box under the control of your bank. The bank deposits the receipts several times each day. The bank then relays deposit information to your CFO so that it may be recorded in your financial records. Using a lock box reduces the inherent risk associated with handling cash and increases the availability of funds for investment. It may reduce or eliminate steps taken as part of your own internal processing.

A fourth way to improve your collection system is to schedule billing wisely. Changing the billing cycles for user charges may also help a local government gain quicker access to collected funds and in return, earn more interest. For example, if you shorten the time period between reading water meters and mailing the billings, you can get the receipts in quicker. Local governments need to review the billing cycles carefully and determine what is a reasonable time period between meter readings and billings. Another option for a local government is to increase the frequency of billings (i.e., bill customers quarterly instead of semi-annually). Local governments also need to review this area carefully to determine if increasing the billing frequencies is cost-effective.

Remember that a good receipt collection and deposit system permits funds to flow as quickly as possible to points where you can make investment decisions. All of the above suggestions can help improve a local government's receipt and deposit system.

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