The Budgetary Cycle - Cash Management

Description:
Cash management is the process of managing revenue, expenditures and cash flow on a daily and monthly basis. It takes into account the procedures for receiving and disbursing funds following the Band's fiscal policy (see Sample Fiscal Policy).

Purpose:
Established procedures for cash management are critical in the overall fiscal planning for a First Nation. This includes the Fiscal Policy, the financial software (see Recommended Financial Software), and hardware required to make and record the daily financial transactions. Cash Management is required to make adjustments to cash flow; this allows the Financial Controller to keep an eye on the overall flow of money in and out of the Band Council.

With effective cash management, the Expenditure and Variance Reports can be accurately prepared. This in turn, allows for effective monitoring of expenditures and revenues on a monthly basis and enables the Controller to identify potential issues arising out of the financial activities of the Band.

Process:
The Financial Controller has the primary responsibility for cash management of the Band. This includes:

  • Ensuring revenues are received as outlined in the Revenue Forecast and the agreed upon cash flows outlined in funding agreements;
  • Ensuring the Band's financial hardware and software (see Recommended Financial Software) are up to date and operational and that finance staff are trained on these systems;
  • Making provisions for effective use of revenues not immediately required for expenditures including interest-bearing options;
  • Making provision for overdraft privileges and loans as necessary; and
  • Ensuring financial transactions (bill payments, payroll, purchase orders, loan payments, etc.) are completed and recorded on a timely and accurate basis.

    Information gathered from regular cash management provides the foundation for Expenditure and Variance Reports.