A company’s principals often cast cash management as a wide-ranging practice that may suffuse the organization’s overall operating culture — covering every segment, function, business unit, process and mechanism. Central to cash management policies are procedures around disbursement accounts, especially those that relate to significant money outflows and long-term investments.
A company uses disbursement accounts to control money it ponies up for expenses as diverse as payroll, litigation, regulatory fines, equipment maintenance and office supplies. Any account the business relies on to monitor what comes out of — and what comes into — corporate cellars qualifies as an outflow account. Given the importance of this account, a lot of strategic thinking goes into the formulation and adoption of disbursement procedures. That way, the direct contributions of department heads and operations managers strengthen the corporate policy handbook's authority and improve the underlying narrative flow, which are important criteria that help employees clearly understand how to disburse funds, when to do so, whom to seek approval from and how to report remittances.
For a business, a well-thought-out payment procedure handbook gives segment chiefs the necessary levers to monitor business activity, account for company money accurately and prevent asset misappropriation — especially cash theft. For example, the corporate treasurer may work in tandem with accounting department personnel to lay the groundwork for effective cash management, instilling in subordinates the importance of things like check tracking, disbursement account surveillance and periodic financial reporting. The latter practice is essential to figure out how much cash came out of disbursement accounts during a given period, such as one month or quarter.
In modern economies, a company's leadership may not allow much leeway in how employees manage disbursement accounts, fearing that a no-holds-barred approach to cash administration could cost the business money down the road. This is because senior executives must manage company money smartly so investors and lenders will perceive the organization as a lower credit risk. Otherwise, creditors may raise the company's cost of borrowing and charge higher interest rates — an adverse development for the business, especially if it needs fresh money to cope with competitive tedium, expand sales and do all the things a company must do remain in business over time.
Accounts payable personnel work in tandem with corporate treasurers and financial managers to monitor how much comes out of disbursement accounts and figure out why the organization must dole out the cash. To perform tasks effectively, these professionals use tools as diverse as cash management software, financial analysis programs, enterprise resource planning software, and accounts receivable and payable management applications.