A

PROJECT REPORT ON

“CASH MANAGEMENT ’’

FOR

IDFC BANK AURANGABAD.

Submitted By

MAITHILI CHANDRASHEKHAR MURHEKAR.

Registration Number :

Under The Guidance Of

Mrs.
Manager
(IDFC Bank Aurangabad)

PGDBA FINANCE

SYMBIOSIS CENTRE FOR DISTANCE LEARNING 2018

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 SPECIMEN

NO OBJECTION CERTIFICATE

This is to certify that MAITHILI CHANDRASHEKHAR MURHEKAR is an employee of

this organization for the past …………month / years.
We have no objection for her to carry out a project work titled “ CASH MANAGEMENT”
in our organization and for submitting the same to the Director, SCDL as a part of
fulfillment of the PGDBA Program.
We wish her all the success.

Seal of the company

Signature of the competent authority of the Institute / Organization

Place:
Date:

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 SPECIMEN

This is to declare that I have carried out this project work myself in part fulfillment of the
PGDBA Program of SCDL.
The work is original, has not been copied from anywhere else and has not been submitted
to any other University/Institute for an award of any degree / diploma.

Date: Signature:
Place: Name:

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 SPECIMEN

Certified that the work incorporated in this Project Report CASH MANAGEMENT
submitted by MAITHILI CHANDRASHEKHAR MURHEKAR her original work and
completed under my supervision. Material obtained from other sources has been duly
acknowledged in the Project Report.

Date: Place: Signature of Guide:

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 Bank Profile

IDFC Bank

IDFC First Bank (formerly IDFC Bank) is an Indian banking company with headquarters
in Mumbai that forms part of IDFC, an integrated infrastructure finance company. The
bank started operations on 1 October 2015. IDFC FIRST received a universal banking
license from the Reserve Bank of India (RBI) in July 2015. On 6 November 2015, IDFC
Bank was listed on BSE and NSE.
In 2014, the Reserve Bank of India (RBI) granted an in-principle approval to IDFC
Limited to set up a new bank in the private sector. Following this, the IDFC Limited
divested its infrastructure finance assets and liabilities to a new entity - IDFC Bank. The
bank was launched through this demerger from IDFC Limited in November 2015.
IDFC Bank started operations in 19 October 2015. with 23 branches in Madhya Pradesh,
Delhi, Mumbai, Hyderabad, Bengaluru, Pune, Chennai, Ahmedabad and Kolkata. 15
branches are in settlements with a population of less than 10,000. IDFC bank has launched
its 100th branch in Honnali, Karnataka in October 2017 The bank serves corporate and
private customers in India including the infrastructure sector that IDFC specialized in from
its founding in 1997. The bank also aims to provide services to people from rural areas
and to the self-employed The bank IDFC Bank is the first in India to launch Aadhaar-
linked cashless merchant solution One of its largest loans into e-commerce includes a ₹3
billion (US$42 million) loan to Flipkart. On 8 November 2017, IDFC Bank entered into a
strategic partnership with digital payments solution company MobiKwik to launch a co-
branded virtual Visa prepaid card for customers of MobiKwik.
On 11 March 2020, the bank announced that it has signed Mr. Amitabh Bachchan, as its
first ever brand ambassador.

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 Chapter 1
Introduction
Cash Management

Cash is the important current asset for the operations of the business. Cash is the basic
input needed to keep the business running on a continuous basis; it is also the ultimate
output expected to be realized by selling the service or product manufactured by the firm.

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The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the
firm’s manufacturing operations while excessive cash will simply remain idle, without
contributing anything towards the firm’s profitability. Thus, a major function of the
financial manager is to maintain a sound cash position. Cash is the money which a firm can
disburse immediately without any restriction. The term cash includes coins, currency and
Cheque held by the firm, and balances in its bank accounts. Sometimes near-cash items,
such as marketable securities or bank time’s deposits, are also included in cash. The basic
characteristic of near-cash assets is that they can readily be converted into cash. Generally,
when a firm has excess cash, it invests it in marketable securities. This kind of investment
contributes some profit to the firm.
Cash management is the process of collecting and managing cash flows. Cash
management can be important for both individuals and companies. In business, it is a
key component of a company's financial stability. For individuals, cash is also essential for
financial stability while also usually considered as part of a total wealth portfolio.
Individuals and businesses have a wide range of offerings available across the financial
marketplace to help with all types of cash management needs. Banks are typically a
primary financial service provider for the custody of cash assets. There are also many
different cash management solutions for individuals and businesses seeking to obtain the
best return on cash assets or the most efficient use of cash comprehensively.

Cash Management comprises of a series of activities aimed at efficiently handling the

inflow and outflow of cash. This mainly involves diverting cash from where it is to where
it is needed. In other words, cash management is the optimization of cash flows, balances
and investments. Cash‟ in this context, may refer either to cash in the form of currency, or
to other equivalents such as Cheque, drafts, deposits, among others. While organizations
may hold other assets which can potentially be converted to cash, cash management

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essentially deals with the management of liquid cash and near-cash assets such as
marketable securities and time deposits, which can be readily converted to cash.

It is crucial to organizations for three main reasons:

a. Transaction: Ready cash balances are vital for routine transactions including purchases,
operating expenses, wages, and other payments such as dividends, taxes and so on.

b. Precaution: There may be unanticipated cash requirements as a result of sudden increase

in inventory costs, delay in collection of receivables, among others. And maintaining ready
cash balances is essential to deal with such unforeseen expenses.

c. Speculation: Reserving cash balances is also crucial when firms anticipate decline in
prices of raw materials, reduction in interest rates for buying securities, availing early
payment discounts, among others.

Chapter 2

Objectives

Objectives of a project tell us why project has been taken under study. It helps us to know
more about the topic that is being undertaken and helps us to explore future prospects of
that organization. Basically it tells what all have been studied while making the project.

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1. To understand how cash is being managed by IDFC Bank (Aurangabad)
2. To gain knowledge about the system prevailing in Banks.
3. To suggest methods for improving cash management in Banks.
4. To study different aspects of Cash Management System.
5. To understand different Payment modes; Speed clearing.
6. To study Central Banking Solutions - Cheque Truncation’s.

Scope of the study

Since it will not be possible to conduct a micro level study of all BANKING in
MAHARASTRA. To know cash flow from one to one, as the time available is very limited
and the subjects are very vast, the study is continued to overall financial condition of a
firm. This study is to know working capital increase or decrease funds from operation,
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sources and application of funds from banks financial analysis consists of funds flow
analysis. To know cash flow from one to one, as the time available is very limited and
study is continued to overall financial condition of a firm. The study to know working
capital increase or decrease, cash from operation, source and application of funds

Need of the study

Many business owners disregard the importance of Cash management because they
unwittingly believe that their current financial standing can be construed from other
financial reports and projections. Unfortunately, however, a cash flow is necessary to
adequately assess the incoming and outgoing flow of cash and other resources in a
business. Not only will a business owner with a cash flow system be more aware of his or

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her financial standing, but it will also help investors to make educated decisions on future
investments. Business with regular and reliable cash flow statements shows more
economic solvency, and is more attractive to investors.

Chapter 3
Theoretical Perspective
Facts of cash management

Cash management is concerned with the managing of

 Cash flows into and out of the firm,

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  Cash flows within the firm, and
 Cash balances held by the firm at a point of time by financing deficit or investing
surplus cash.
It can be represented by a cash management cycle. Sales generate cash which has to be
disbursed out. The surplus cash has to be invested while deficit this cycle at a minimum
cost. At the same time, it also seeks to achieve liquidity and control. Cash management
assumes more importance than other current assets because cash is the most significant and
the least productive asset that a firm’s holds. It is significant because it is used to pay the
firm’s obligations. However, cash is unproductive. Unlike fixed assets or inventories, it
does not produce goods for sale. Therefore, the aim of cash management is to maintain
adequate control over cash position to keep the firm sufficiently liquid and to use excess
cash in some profitable way. Cash management is also important because it is difficult to
predict cash flows accurately, particularly the inflows, and there is no prefect coincidence
between the inflows and outflows of cash. During some periods, cash outflows will exceed
cash inflows, because payments for taxes, dividends, or seasonal inventory build up. At
other times, cash inflow will be more than cash payments because there may be large cash
sales and debtors may be realized in large sums promptly. Further, cash management is
significant because cash constitutes the smallest portion of the total current assets, yet
management’s considerable time is devoted in managing it. In recent past, a number of
innovations have been done in cash management techniques. An obvious aim of the firm
these days is to manage its cash affairs in such a ways to keep cash balance at a minimum
level and to invest the surplus cash in profitable investment opportunities. In order to
resolve the uncertainty about cash flow prediction and lack of synchronization between
cash receipts and payments, the firm should develop appropriate strategies for cash
management. The firm should evolve strategies for cash management. The firm should
evolve strategies regarding the following four facets of cash management.
1. Cash planning
Cash planning and control of cash is the central point of finance functions. Maintenance of
adequate cash is one of the prime responsibilities of the financial manager. It is possible
only through the preparation of cash planning. Cash control is also included in cash
planning. Since planning and control are the twins of management. Cash planning is
a technique to plan and control the use of cash. A projected cash flow statement prepared
based on expected cash receipts and payments, is the anticipation of the financial condition
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of the firm. Cash planning may be prepared on the daily, weekly, monthly or quarterly
basis. The period for which the cash planning is prepared depends on the size of the firms
and management’s philosophy. Large firms prepare daily and weekly forecasts. Medium
size firms prepare weekly and monthly forecasts. Small firms may not prepare cash
forecasts due to non-availability of data and less scale of operations. But in a short period
they may service but over a long period, they have to prepare cash planning for the success
of the firm.
Cash forecast is used as a method to predict future cash flow because it deals with the
estimation of cash flows (i.e., cash inflows and cash outflows) at different stages and offers
the management an advance notice to take appropriate and timely action. The cash budget
is an important tool for the flow of cash in any firm over a future period of time. In other
words, it is a statement showing the estimated cash inflows and cash outflows over a
planning period. It pinpoints the surplus or deficit cash of a firm as it moves from one
period to another period. The surplus of deficit data helps the financial manager to
determine the future cash needs of the firm, plan for the financing of those needs and
exercise control over the cash and liquidity of the firm. The cash budget is also known as
short-term cash forecasting Purpose of Cash Budget

Cash budget has proved to be of great help and benefit in the following areas:
1. Estimating cash requirements
2. Planning short-term finance planning
3. Scheduling payments, in respect of acquiring capital goods
4. Planning and phasing the purchase of raw materials
5. Evolving and implementing credit policies
6. Checking and verifying the accuracy of long-term cash forecasting.

2.Managing the cash flows

Cash flow management refers to the process by which an organization maintains control
over the inflow and outflow of funds. The fundamental goal of cash flow management is to
ensure that the incoming flow of funds is always greater than the outgoing so that the
business sits on a surplus. Cash flow management also serves the ancillary function of
ensuring the surplus funds are invested or held wisely to reap optimum returns on capital
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blocked. Money or cash is the lifeblood of any business. When the cash stops circulating,
all the critical operations can come to a standstill. However, it is important to understand
that cash flow is not synonymous with profits. A business may have positive cash flows
and still be loss-making. Cash flow management must be thought of as an intervening tool
between payment to vendors or banks and receipt from customers. It seeks to seamlessly
coordinate the payments and receipts in a manner that the payment to vendors is possible
as per their credit terms after considering the payment cycle of customers. The ultimate
goal of cash flow management is to ensure that the business does not run into cash
shortages. A business must not be overdue in payments to creditors. Similarly, it must not
have long-standing debtors on its books. The emergence of such cases is a signal for the
cash flow manager to take charge. The firm should decide about the properly managed.
The cash inflows should be accelerated while, as far as possible, the cash outflows
shoulder decelerated.

3.Optimum cash level

The firm should decide about the appropriate level of cash balances. The cost of excess
cash and danger of cash deficiency should be matched to determine the optimum level of
cash balances.
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4.Investing surplus cash

The surplus cash balances should be properly invested to earn profits. The firms should
decide about the division of such cash balances between alternative short-term investment
opportunities such as bank deposits, marketable securities, or inter Surplus cash refers to
the excess cash available in an organization or firm above the normal cash requirements.
Any idle cash earns no further interest and therefore not productive. So, it has to be
invested in interest bearing securities or deposits. To successfully complete these tasks, the
cash manager has to first calculate the optimum level of cash required to carry out normal
operations. Thus, any surplus cash availability will be known. After that, he has to choose
from the various channels of investment that give the best benefits.

Components of Cash Management

1.1.1. Account Reconciliation:

Managing Cheque, monitoring their clearance, and keeping track of the true cash balance
can be an overwhelming task for businesses because of the huge number of Cheque that
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are processed on a daily basis. Hence banks offer account reconcilement services wherein
corporate customers can upload details about the Cheque issued on a daily basis. And at
the end of the month, the bank statement shows information on Cheque which have been
cleared and those which have not. This system is also helpful in the process known as
„positive pay‟, used by banks to prevent Cheque from being fraudulently cashed if they are
not on the list.

1.1.2. Cash Concentration:

This is a quick and cost-effective method of moving funds from different accounts spread
across the country to a single monitored and managed account. This allows businesses to
maximize the use of available cash, and to optimize returns on consolidated balances Cash
Concentration is a corporate treasury management strategy involving the transfer of all
funds from different accounts to a single, centralized account to increase cash management
efficiency and reduce fees. There are numerous advantages to concentrating all available
funds into a single account. Businesses improve their investment potential as well as the
visibility and availability of their funds, they gain more control over deposits from diverse
locations and can easily ensure that no funds are lying in bank accounts that don’t generate
interest. Cash concentration also reduces bank service charges to those of the central

account and makes it simpler to monitor cash flows.

1.1.3. Financial Risk Management:

Risk management is the process of measuring risk, and developing and implementing
strategies to manage and mitigate risk. Financial risk management plays an important role
in cash management, because it focuses on managing risks in relation to changes in interest
rates, commodity prices, stock prices, exchange rates, among others.

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1.1.4. Liquidity Management:

Forecasting the cash needs of a business is essential for managing cash flows, short-term
borrowings, among others in an efficient manner, in order to ensure that such cash needs
can be met if and when they arise. This requirement is addressed through liquidity
management services offered by banks. Liquidity management comprises of activities that
release the investments locked in working capital, enabling it to contribute to higher
profits. It also refers to the specific services provided by banks to enable their customers
optimize their interest revenues and reduce interest costs.

Why Cash Management

1. Complete Visibility: Corporate customers increasingly expect superior cash forecasting

ability, for which they need complete enterprise level visibility into cash balances and
movement of cash. This is provided by banks in the form of status reports, direct enquiry,
and through consolidated view of accounts held with branches/banks across the globe.

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2. Rich Reporting Modules: In order to make corporate customers understand the need to
adopt cash management services, banks are showing cost-benefit analysis reports, and
demonstrating the benefits offered by cash management using graphs and illustrations.

3. Integrated Services: Corporate customers prefer a single platform for all their financial
needs in place of disparate systems. Hence the focus is on integrating cash management
systems with other activities involving the bank. For example, linking of ERP solutions
with banking systems facilitates cash management by enabling effective trade finance
process and investment management, among others.

4. Remote Deposit Capture and Straight- Through Processing - (STP): In order to

accelerate transactions businesses are looking for solutions that offer straight through
processing capability. For example, corporate customers are trying to streamline their
transactions and reduce downtime, for which banks offer STP services which enable
businesses to conduct entire trade processes and payments electronically. And to better
serve the needs of corporate customers, banks look to technology vendors who offer
optimal solutions that can enable more efficient cash management.

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The Role of Technology in Optimizing Cash Management: Cash management
solutions are not new. The market is mature and many banks offer efficient cash
management solutions. But market forces, economic conditions, and changing corporate
trends have generated opportunities for further innovations in this space. Although
traditionally a large number of these solutions have been windows-based, with many
corporate customers embracing internet banking, several banks are now migrating to
browser based solutions. Technology has been the driving force in optimizing cash
management solutions for corporate customers:

 Browser-based solutions facilitate centralization of cash management thereby

enabling better accessibility by users across the organization thereby having a
better control of cash flows.

 Online banking and STP (Straight- Through Processing) help quicken payments,
thereby accelerating business and streamlining processes by eliminating redundant
manual processes.

 360 degree view of accounts offers greater visibility on cash position thereby
improving the forecasting ability.

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 Conceptual review

Optimum Utilization of Operating Cash

Implementation of a sound cash management programmed is based on rapid generation,
efficient utilization and effective conversation of its cash resources. Cash flow is a circle.
The quantum and speed of the flow can be regulated through prudent financial planning
facilitating the running of business with the minimum cash balance. This can be achieved
by making a proper analysis of operative cash flow cycle along with efficient management
of working capital.

Cash Forecasting
Cash forecasting is backbone of cash planning. It forewarns a business regarding expected
cash problems, which it may encounter, thus assisting it to regulate further cash flow
movements. Lack of cash planning results in spasmodic cash flows.

Cash Management Techniques

Every business is interested in accelerating its cash collections and decelerating cash
payments so as to exploit its scarce cash resources to the maximum. There are techniques
in the cash management which a business to achieve this objective.

Liquidity Analysis
The importance of liquidity in a business cannot be over emphasized. If one does the
autopsies of the businesses that failed, he would find that the major reason for the failure
was their un-ability to remain liquid. Liquidity has an intimate relationship with efficient
utilization of cash. It helps in the attainment of optimum level of liquidity.

Profitable Deployment of Surplus Funds

Due to non-synchronization of ash inflows and cash outflows the surplus cash may arise at
certain points of time. If this cash surplus is deployed judiciously cash management will
itself become a profit centre. However, much depends on the quantum of cash surplus and
acceptability of market for its short-term investments.

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 Economical Borrowings

Another product of non-synchronization of cash inflows and cash outflows is emergence of

deficits at various points of time. A business has to raise funds to the extent and for the
period of deficits. Raising of funds at minimum cost is one of the important facets of cash
management. The ideal cash management system will depend on the firm’s products,
organization structure, competition, culture and options available. The task is complex, and
decisions taken can affect important areas of the firm. For example, to improve collections
if the credit period is reduced, it may affect sales. However, in certain cases, even without
fundamental changes, it is possible to significantly reduce cost of cash management system
by choosing a right bank and controlling the collections properly.

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 Motives for holding cash

The firm’s need to hold cash may be attributed to the following the motives:
1.The transactions motive
2.The precautionary motive
3.The speculative motive

Transaction Motive

The transaction motive requires a firm to hold cash to conducts its business in the ordinary
course. The firm needs cash primarily to make payments for purchases, wages and salaries,
other operating expenses, taxes, dividends etc. The need to hold cash would not arise if
there were perfect synchronization between cash receipts and cash payments, i.e., enough
cash is received when the payment has to be made. But cash receipts and payments are not
perfectly synchronized. For those periods, when cash payments exceeds cash receipts, the
firm should maintain some cash balance to be able to make required payments. For
transactions purpose, a firm may invest its cash in marketable securities. Usually, the firm
will purchase securities whose maturity corresponds with some anticipated payments, such
as dividends, or taxes in the future. Notice that the transactions motive mainly refers to
holding cash to meet anticipated payments whose timing is not perfectly matched with
cash receipts.

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 Precautionary motive

The precautionary motive is the need to hold cash to meet contingencies in the future. It
provides a cushion or buffer to withstand some unexpected emergency. The precautionary
amount of cash depends upon the predictability of cash flows. If cash flow can be predicted
with accuracy, less cash will be maintained for an emergency. The amount of
precautionary cash is also influenced by the firm’s ability to borrow at short notice when
the need arises. Stronger the ability of the firm to borrow at short notice, less the need for
precautionary balance. The precautionary balance may be kept in cash and marketable
securities. Marketable securities play an important role here. The amount of cash set aside
for precautionary reasons is not expected to earn anything; therefore, the firm attempt to
earn some profit on it. Such funds should be invested in high-liquid and low-risk
marketable securities. Precautionary balance should, thus, held more in marketable
securities and relatively less in cash.

Speculative motive

The speculative motive relates to the holding of cash for investing in profit-making
opportunities as and when they arise. The opportunity to make profit may arise when the
security prices change. The firm will hold cash, when it is expected that the interest rates
will rise and security prices will fall. Securities can be purchased when the interest rate is
expected to fall; the firm will benefit by the subsequent fall in interest rates and increase in
security prices. The firm may also speculate on materials’ prices. If it is expected that
materials’ prices will fall, the firm can postpone materials’ purchasing and make purchases
in future when price actually falls. Some firms may hold cash for speculative purposes. By
and large, business firms do not engage in speculations. Thus, the primary motives to hold
cash and marketable securities are: the transactions and the precautionary motives.

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 Investing surplus cash in marketable securities

There is a close relationship between cash and money market securities or other short-term
investment alternatives. Investment in these alternatives should be properly managed.
Excess cash should normally be invested in those alternatives that can be conveniently and
promptly converted into cash. Cash in excess of the requirement of operating cash balance
may be held for two reasons. First, the working capital requirements of the firm fluctuate
because of the elements of seasonality and business cycles. The excess cash may build up
during slack seasons but it would be needed when the demand picks up. Thus, excess cash
during slack season is idle temporarily, but has a predictable requirement later on. Second,
excess cash may be held as buffer to meet unpredictable financial needs. A firm holds extra
cash because cash flows cannot be predicted with certainty. Cash balance held to cover the
future exigencies is called the precautionary balance and is usually invested in the short-
term money market investments until needed. Instead of holding excess cash for the above-
mentioned purpose, the firm may meet its precautionary requirements as and when they
arise by making short-term borrowings. The choice between the short-term borrowings and
liquid assets holding will depend upon the firm’s policy regarding the mix of short-term
financing. The excess amount of cash held by the firm to meet its variable cash
requirements and future contingencies should be temporarily invested in marketable
securities, which can be regarded as near moneys. A number of marketable securities may
be available in the market. The financial manager must decide about the portfolio of
marketable securities in which the firm’s surplus cash should be invested.

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 Types of Short-term Investment Opportunities

The following short-term investment opportunities are available to companies in India to

invest their temporary cash surplus:

Treasury bills

Treasury bills (TBs) are short-term government securities. The usual practice in India is to
sell treasury bills at a discount and redeem them at par on maturity. The difference between
the issue price and the redemption price, adjusted for the time value of money, is return on
treasury bills. They can be bought and sold any time; thus, they have liquidity. Also, they
do not have the default risk.

Commercial papers

Commercial papers (CPs) are short-term, unsecured securities issued by highly credit
worthy large companies. They are issued with a maturity of three months to one year. CPs
are marketable securities, and therefore, liquidity is not problem.

Certificates of deposits

Certificates of deposits (CDs) are papers issued by banks acknowledging fixed deposits for
a specified period of time. CDs are negotiable instruments that make them marketable
securities.

Bank deposits

A firm can deposit its temporary cash in a bank for a fixed period of time. The interest rate
depends on the maturity period. For example, the current interstate for a 30 to 45 days
deposit is about 3 percent and for 180 days to one year is about 6-7 percent. The default
risk of the bank deposits is quite low since the government owns most banks in India.

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 Inter-corporate deposits

Inter-corporate lending borrowing or deposits (ICDs) is popular short-term investment

alternative for companies in India. Generally a cash surplus company will deposit (lend) its
funds in a sister or associate companies or with outside companies with high credit
standing. In practice, companies can negotiate interoperate borrowing or lending for very
short periods. The risk of default is high, but returns are quite attractive.

Money market mutual funds

Money market mutual funds (MMMFs) focus on short term marketable securities such as
TBs, CPs, CDs, or call money. They have a minimum lock-in period of 30 days, and after
this period, an investor can withdraw his or her money any time at a short notice or even
across the counter in some cases. They offer attractive yields; yields are usually 2 percent
above than on bank deposits of same maturity. MMMFs are of recent origin in India, and
they have become quite popular with institutional investors and some companies.

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 Cash Management Services generally offered

The following is a list of services generally offered by banks and utilized by larger
businesses and corporations:

Account reconcilement services

Balancing a checkbook can be a difficult process for a very large business, since it issues
so many checks it can take a lot of human monitoring to understand which checks have not
cleared and therefore what the company’s true balance is. To address this, banks have
developed a system which allows companies to upload a list of all the checks that they
issue on a daily basis, so that at the end of the month the bank statement will show not only
which checks have cleared, but also which have not. More recently, banks have used this
system to prevent checks from being fraudulently cashed if they are not on the list, a
process known as positive pay.

Advanced Web Services

Most banks have an Internet-based system which is more advanced than the one available
to consumers. This enables managers to create and authorize special internal logon
credentials, allowing employees to send wires and access other cash management features
normally not found on the consumer web site.

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 Automated Clearing House

Services are usually offered by the cash management division of a bank. The Automated
Clearing House is an electronic system used to transfer funds between banks. Companies
use this to pay others, especially employees(this is how direct deposit works). Certain
companies also use it to collect funds from customers (this is generally how automatic
payment plans work). This system is criticized by some consumer advocacy groups,
because under this system banks assume that the company initiating the debit is correct
until proven otherwise.

Balance Reporting Services

Corporate clients who actively manage their cash balances usually subscribe to secure
web-based reporting of their account and transaction information at their lead bank. These
sophisticated compilations of banking activity may include balances in foreign currencies,
as well as those at other banks. They include information on cash positions as well as 'float'
(e.g., checks in the process of collection).Finally, they offer transaction-specific details on
all forms of payment activity, including deposits, checks, wire transfers in and out, ACH
(automated clearinghouse debits and credits), investments, etc.

Cash Concentration Services

Large or national chain retailers often are in areas where

their primary bank does not have branches. Therefore, they open bank accounts at various
local banks in the area. To prevent funds in these accounts from being idle and nonearning
sufficient interest, many of these companies have an agreement set with their primary
bank, whereby their primary bank uses the Automated Clearing House to electronically
"pull" the money from these banks into a single interest-bearing bank account.

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 Lockbox services
Often companies (such as utilities) which receive a large number of payments via checks in
the mail have the bank set up a post office box for them, open their mail, and deposit any
checks found. This is referred to as a "lockbox" service.

Positive Pay
Positive pay is a service whereby the company electronically shares its check register of
all written checks with the bank. The bank therefore will only paychecks listed in that
register, with exactly the same specifications as listed in the register(amount, payee, serial
number, etc.). This system dramatically reduces check fraud.

Sweep Accounts
Sweep accounts are typically offered by the cash management division of a bank.
Under this system, excess funds from a company's bank accounts are automatically
moved into a money market mutual fund overnight, and then moved back the next
morning. This allows them to earn interest overnight. This is the primary use of money
market mutual funds.

Zero Balance Accounting

This can be thought of as somewhat of a hack. Companies with large numbers of stores or
locations can very often be confused if all those stores are depositing into a single bank
account. Traditionally, it would be impossible to know which deposits were from which
stores without seeking to view images of those deposits. To help correct this problem,
banks developed a system where each store is given their own bank account, but all the
money deposited into the individual store accounts are automatically moved or swept into
the company's main bank account. This allows the company to look at individual
statements for each store. U.S. banks are almost all converting their systems so that
companies can tell which store made a particular deposit, even if these deposits are all
deposited into a single account. Therefore, zero balance accounting is being used less
frequently.

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 Wire Transfer

A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple
bank account transfer, or by a transfer of cash at a cash office. Bank wire transfers are
often the most expedient method for transferring funds between bank accounts. A bank
wire transfer is a message to the receiving bank requesting them to effect payment in
accordance with the instructions given. The message also includes settlement instructions.
The actual wire transfer itself is virtually instantaneous, requiring no longer for
transmission than a telephone call.

Controlled Disbursement

This is another product offered by banks under Cash Management Services. The bank
provides a daily report, typically early in the day, that provides the amount of
disbursements that will be charged to the customer's account. This early knowledge of
daily funds requirement allows the customer to invest any surplus in intraday investment
opportunities, typically money market investments. This is different from delayed
disbursements, where payments are issued through a remote branch of a bank and customer
is able to delay the payment due to increased float time. In the past, other services have
been offered the usefulness of which has diminished with the rise of the Internet. For
example, companies could have daily faxes of their most recent transactions or be sent CD-
ROMs of images of their cashed checks.

30
 Cash Management Tools

The corporate objectives of an enterprise should resonate in the cash flows structure. Aside
traditional feedback, feed forwards system should be built into cash flows management
system to properly align corporate objectives, vision, and mission with the enterprise actual
finance, be able to analyze how far for corrective, and update purpose. Cash planning is a
strategic part of strategic planning. Cash flows forecast is management-planning
mechanism for decision-making purpose, it is the foundation of cash management. Sources
for cash forecast preparation are historical records, corporate aim and objectives, inputs
from business units/departments, previous period forecast and errors therein. Judgmental
input base on comprehensive knowledge of business is a salient groundwork for the
preparation of cash-flow forecast. Adjustment of cash flows for the realities of time value
of money is important. Cash flows forecast is an early warning device for financial
management, it encourages proactive financial management. It sets expectations and
challenges management to meet target prudently, shows problems and how to ameliorate
such, make sure the organization do not run out of cash. Cash forecast should involve
divisional managers, because divisional heads have better understanding on the expected
cash flow in respect of their units. Expected time for cash receipt and payment should be
considered irrespective of when such is earned or incurred. The actual balance in the bank
accounts should be the opening cash balance, not the book cash balance; similarly, the
closing bank balance should be the closing balance in the bank accounts at the end of the
financial period. It is noteworthy that cash flows reported in financial statements obliquely
reflects the internal cash flows report for cash management.

31
 Purpose of cash management

Cash management helps to ensure that adequate levels of capital are available to a
business for short-term needs such as inventory purchases. A good cash management
program can significantly influence the efficiency of operations, which can also reduce
overall costs. The goal of most cash management systems is to eliminate surprises related
to cash by meeting the daily cash requirement at the lowest cost possible.

Internal Controls

One of the most important goals of any cash management system is to help the business
stay legal. While maintaining adequate levels of cash on hand is important to keep costs
low and inventory levels steady, the legal implications of an error in financial accounts
are serious. As such, much time is spent on developing robust financial controls which
audit and prevent errors in cash receipts, disbursements and paying taxes.

Clear Financial Communication

It is the role of the CFO and/or Treasurer to establish a clear way to communicate with
the organization for any issue relating to cash management. This requires communication
directly with department heads. Many Treasurers create the Cash Flow Statement (a cash
budget) as a way to communicate changes in cash flow to both internal and external
stakeholders. This also helps to forecast cash disbursements and collections.

Develop External Financial Relationships

Cash management is usually a joint effort between the Treasurer and the banker. Cash
management products are constantly evolving. It is the goal of the Treasurer to stay
abreast of the latest products, which helps to establish a professional financial
relationship with representatives from the banking community. A good record for cash
management can lead to better funding opportunities in the future.

32
 Chapter 4

Research methodology

Research

Research is a process in which the researchers wish to find out the end result for a given
problem and thus the solution helps in future course of action. The research has been
defined as “A careful investigation or enquiry especially through search for new facts in
branch of knowledge”

Research design

The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to
make a critical evaluation of the performance.

Data collection

Primary sources

1. Data are collected through personal interviews and discussion with Finance- Executive.
2. Data are collected through personal interviews and discussion with Material Planning-
Deputy Manager.

Secondary Sources

1. From the annual reports maintained by the company.

2. Data are collected from the company’s website.
3. Books and journals pertaining to the topic.

Tools used in the analysis

 Cash flow statement

 Trend analysis
 Ratio analysis.

33
 Chapter 5
Data Analysis

There are many parameters on which people evaluate the health of a business. One of the
most important parameters is cash. Businesses require cash to manage regular periodic
functions that include payment of rent, salaries, utilities and other expenses of daily nature.
Businesses follow a cycle of investment, production and sales. Typically, promoters use
their own funds or borrow to invest in the business, produce and then earn revenue through
sales to recoup their investment. There is a time lag between production and sales during
which time businesses need to pay for undertaking daily business functions. Therefore,
businesses need cash to pay during this lag period.

Cash management
It is a critical component of business operations needing special attention. It is possible that
a business can make a profit with poor cash management, but with good cash management,
profits could be much more. For instance, if a business is borrowing funds for working
capital management, then it is paying interest on the borrowed funds which is a cost to the
business. Now, if the business monitors its inventories, accounts payable and accounts
receivable properly, then it is likely that it may not need to borrow for working capital thus
saving on interest which adds back to profit. Thus, businesses need to bestow more care to
their cash management functions.

IDFC FIRST Bank Cash Management Services

IDFC FIRST Bank offers excellent cash management services to ensure that businesses run
more efficiently. The bank offers several product solutions that help businesses to manage
their cash more efficiently. The product solutions include

Point of sale solutions

Receivables management
Payables management
34
The many features of each of the product solutions are as follows.

Point of Sale Solutions

IDFC FIRST Bank's point of sale solutions comprises digital solutions that its merchant
customers could use to manage their sales efficiently. It consists of various payment
methods that the digital world offers. These include

MPOS - a portable solution that can accept cash, Cheque or card payments

EDC Terminal - accepts Rupay, Maestro, MasterCard and Visa cards globally
Payment Gateway - mobile optimized for payment options across all devices

Aadhaar Pay - facilitates cashless purchases through Aadhaar number validated by

thumbprint

UPI - payment acceptance through UPI QR code on BHIM or UPI app

The payment solutions are versatile as they are compatible with most devices either offline
or online, these accept multiple format credit and debit cards, prepaid cards and digital
wallets. These options allow businesses to ensure utmost satisfaction to customers. They
also enable IDFC FIRST Bank and customers to track, store and retrieve any payment
record. The solutions use the latest technologies for ensuring the safety and security of
transactions guarding against frauds.

35
 Receivables Management

IDFC FIRST Bank’s receivables management feature is progressive and tailored to suit
requirements of any business. Businesses can receive payment in multiple formats, all from
their place of business without visiting the bank at all. Some of the benefits of the feature
include

Cash transactions - customized multi-location cash pickup solutions, cash counting and
verification, documentation of each pickup

Cheque collections – local and outstation collection, multi-location pickups,

documentation of each Cheque, timely realization and clearance of Cheque

NACH Debit – using the National Automated Clearing House (NACH) service of NPCI,
businesses can handle low-value transactions of large volumes, set up periodic repetitive
payments, documentation

E-collections – a virtual account solution that streamlines and simplifies, seamless

integration with business’ ERP system, documentation

PACE – a secured website for online payments, customized forms, documentation,

tracking feature, e-tendering

36
 Chapter 6

Limitations

Cash is the important

current asset for the
operations of the business.
Cash is the basic input
needed to keep the business
running on a continuous
basis; it is also the ultimate
output expected
to be realized by selling the
service or product
manufactured by the firm.
The firm should keep

37
sufficient cash, neither
more nor less. Cash
shortage will disrupt the
firm’s manufacturing
operations while excessive
cash will simply remain
idle, without contributing
anything towards
the firm’s profitability.
Thus, a major function of
the financial manager is to
maintain a sound
cash position.
Cash is the money which a
firm can disburse
38
immediately without any
restriction. The term cash
includes coins, currency
and cheques held by the
firm, and balances in its
bank accounts.
Sometimes near-cash
items, such as marketable
securities or bank time’s
deposits, are also
included in cash. The basic
characteristic of near-cash
assets is that they can
readily b

39
Cash is the important
current asset for the
operations of the business.
Cash is the basic input
needed to keep the business
running on a continuous
basis; it is also the ultimate
output expected
to be realized by selling the
service or product
manufactured by the firm.
The firm should keep
sufficient cash, neither
more nor less. Cash

40
shortage will disrupt the
firm’s manufacturing
operations while excessive
cash will simply remain
idle, without contributing
anything towards
the firm’s profitability.
Thus, a major function of
the financial manager is to
maintain a sound
cash position.
Cash is the money which a
firm can disburse
immediately without any
restriction. The term cash
41
includes coins, currency
and cheques held by the
firm, and balances in its
bank accounts.
Sometimes near-cash
items, such as marketable
securities or bank time’s
deposits, are also
included in cash. The basic
characteristic of near-cash
assets is that they can
readily b
1.The allotted time period of 8 weeks for the study was relatively insufficient, keeping in
mind the long duration it can take at times, to close a particular corporate deal.

2.The study might not produce absolutely accurate results as it was based on a sample
taken from the population.

42
3.It was difficult getting time and access to senior level Finance/HR managers (who had to
be talked to, to get required information) due to their busy schedules and prior
commitments.

4.A few of the managers refrained from giving the required information as he considered
me to be from their confidential domains.

5.The study does not take into account the inflation.

6.The study takes into account only the quantitative data and the qualitative aspect were
not taken into account

Cash is the important

current asset for the
operations of the business.
Cash is the basic input
needed to keep the business
running on a continuous
basis; it is also the ultimate
output expected
43
to be realized by selling the
service or product
manufactured by the firm.
The firm should keep
sufficient cash, neither
more nor less. Cash
shortage will disrupt the
firm’s manufacturing
operations while excessive
cash will simply remain
idle, without contributing
anything towards
the firm’s profitability.
Thus, a major function of

44
the financial manager is to
maintain a sound
cash position.
Cash is the money which a
firm can disburse
immediately without any
restriction. The term cash
includes coins, currency
and cheques held by the
firm, and balances in its
bank accounts.
Sometimes near-cash
items, such as marketable
securities or bank time’s
deposits, are also
45
included in cash. The basic
characteristic of near-cash
assets is that they can
readily b

Chapter 7

Findings

The study allowed us get answers regarding the service awareness among people and the
problems it faces. The key findings and analysis of the survey showed the following

 A large number of clients and customers call the branch frequently to handle
banking issues , this shows the keenness of the customers to call the branch for
almost every small issue. The service Straight to bank does provide an answer to
the problem of the customers. The service provided by straight to bank does offer
the main requirements of the customers for which they visit or call the branch.

 All the respondents wanted to carry out the banking needs at their convenience.
This means the service caters the banking needs that customers generally require
and its main benefit of banking while sitting at office is desired by one and all,
thereby proving that the service does have the potential usage.

46
  Few of the respondents were aware about the service which was desired by 100%
respondents clearly showing that there has been a falter in its promotion and
awareness strategies.

 Customers were not aware that the service was a free one, this is clear that almost
all the attributes of the services are favorable to the customers still customers are
not using the service and are not even aware of it.

Chapter 8

SUGGESTIONS

1. India being a price sensitive market; people at times go for monetary benefits rather than
for long-term non- monetary benefits. If charges can’t be reduced because of costs
involved, make the services customized, so that services are provided to only those
customers who are willing to pay the price for services they are getting and let the other
customers enjoy costs benefits without getting services.

2.IDFC should provide competitive prices as nowadays a lot business is being acquired
by AXIS bank and HDBC bank and IDFC is facing a lot competition from these banks.

3.IDFC should contact with their clients regularly for knowing the problems faced by
47
them. This will help IDFC in providing best services to customers. This will result in
additional customer base by getting further references from satisfied clients.

4.IDFC should focus on getting the business other business clients other than its existing
customers as it would help them to increase their business opportunities.

Chapter 9
Conclusion

Finally, here I am concluding the project Almost all customers once educated about the
service readily enrolled for it whereas a mere portion did not would have they are not
putting forward Many clients who enrolled for the straight to bank service would have
problems using it as the drop boxes are not strategically placed many areas do not even
have drop box facility; State Bank must look into the policies of installing the drop box.
They should assign it to the regional office or allow branches to put up boxes where the
branch thinks it would be optimally utilized no matter which area of the city as of now that
branches are allowed to put up drop boxes in a radius which falls in close by areas to the
branch. A customer who lives close by to the branch would not use this service whereas
customers who are far of require the service, however the branch cannot provide them with
the facility as they cannot install the boxes in that area and it is the duty of the local branch

48
of that area to put up boxes which is not happening they hardly know where customers of
the other branch are located.

Chapter 10
Summary

49
References

50