Dealing Cash Management with ERP System

The cash management module within an ERP system mostly deals with the overall cash flow of the organization. It keeps a track of the bank transactions, cash transactions, sales invoice receipts, standalone payments and payments that are due for allotment.

The cash management module also takes into account the financial transactions that take place within a given period of time. It also keeps a track of the funds that are being utilized by the company for various purposes. In essence, it offers a real-time tracking of the balance sheet of the company. It goes a long way in meeting the financial obligations that are due in the account of the company.

Master Data Management

Maintaining a master database is an integral part of almost all cash management modules. These may include the following:

• Tracking Payment / Receipt: During this phase, payments / receipts are tracked by the module using various parameters. They are as follows:
  • It involves recognizing the payment mode, whether it is automatic or manual.
  • Determining the maximum payout amount for various business partners within a single batch.
  • Maintaining a directory of the Bank account numbers / Bank addresses for receiving or making payments.
  • Mode of payment could either be through a cheque or online.
  • Option to remit a payment or to carry out large transactions.
• Bank Relations: This segment deals with the currency type (domestic or foreign), the type of bank that was involved in the transaction and checking for blocked payments if any.
• Integration with the General Ledger: This stage mostly deals with integrating all the payment related aspects under one roof. It also keeps a track of the payments or receipts that are due to be realized such as a cheque which has been issued but is yet to be realized etc.
• Payment Authorization: This part determines the maximum amount of payment that a user can authorize at his/her end. It also determines if that particular user is authorized to make any advance payments or not.

Functionality

There are various functionalities in a cash management module. Some of the main features are as listed below:

• Supplier Payment: A flow diagram for payment to suppliers is as given below. However, in case of standing orders (payments without an invoice), stand alone payments and payments against proforma invoices a variation of this process might also occur.
  • Selection and composing of invoice that is to be readied for payment.
  • Taking printouts of the payment advice list.
  • Making any modifications to the payment advice
  • Reconciliation of the payment amount as per the invoice or payment advice.
  • Assign the job to a particular bank.
  • Keeping a record of the cheques or posting bank orders in electronic format.
  • Update the general ledger as per the transactions.
• 2. Sales invoice receipts:
  • Cheque: Receiving cheques from customers, sending them to the bank, clearance of the cheque by the bank.
  • Direct Debit: This is only applicable to those customers who have given authorization to directly debit their bank account.
• Cash Flow projections: Cash flow projections can also be had of by using a cash management module with an ERP system. It would give some rough estimates about the financial well-being of the company at a certain date in the future based on the financial data that is currently