Providing for sound cash management assures that investments are optimized for the best possible return for taxpayers.
We strongly recommend the following best practices for cash management.
Actively Monitor Cash Flow
Improving cash management starts with building an accurate cash flow estimate and monitoring your actual receipts and disbursements.
- Perform a detailed cash flow analysis.
- Identify major revenue and expenditure types and their expected timing.
- Review historical data to determine typical cash inflows and outflows throughout the fiscal year.
- Identify reserves and other balances that could be invested longer term.
- Review monthly analysis reports from your bank, in addition to monthly account reconciliations. Alternatively, consider using an automated financial management information system to track daily cash balances.
Accelerate Collection of Receipts
Increasing the frequency of billing (for example, from semiannual to quarterly) will provide a quicker and steadier stream of income, which you can then invest for higher interest earnings.
- Ensure that the added operational costs of more frequent billing don’t significantly offset the earnings from the extra investment income.
- Explore contracting with a bank for the collection of receipts, such as property taxes, so that payment can be made directly to the bank account.
- Set up electronic funds transfer (EFT) with your bank to receive payments from the State and certain other entities.
Optimize Timing of Disbursements
Generally, the longer you hold cash prior to disbursement, the more interest you can earn. However, you may incur late fees if you end up delaying bill payments.
- Check to see whether any of your vendors offer early-payment discounts.
- Analyze your full range of disbursements.
- Consider the use of technologies such as EFT and online banking to optimize timing of disbursements.
Maximize Interest Earnings
Following prudent yet effective investment strategies can improve cash inflow and even reduce costs.
- Ensure that all of your cash is in interest-bearing accounts.
- Consider longer-term investments that pay higher interest rates for infrequently disbursed funds.
- Establish a formal investment policy, if you haven’t already, to guide your municipality in making these decisions, and review it annually.
- Consolidate accounts when feasible to minimize bank fees, while continuing to maintain separate accounts on your municipality’s books.
- Issue a request for proposals (RFP) for banking services every three-to-five years to maximize interest and minimize fees.
Public moneys must be deposited and invested in accordance with the following New York State statutes (note that a number of federal laws also pertain to the deposit and investment of public moneys).
Visit this page to learn more about specific legal requirements related to cash management for local governments.
More Information about Electronic Payments of State Aid
- Cash Management and Bank Reconciliation [pdf]
- Cash Management Technology [pdf]
- New York State Office of the State Comptroller, Bureau of Accounting Operations, Warrant and Payment Control Unit at:
E-mail: [email protected] or call (518) 474-4032