Cash management can be used to control cash by establishing thresholds relating to how much money a company maintains in certain accounts and who can access those funds.
Tamara Elamin
Cash management can be used to control cash by establishing thresholds relating to how much money a company maintains in certain accounts and who can access those funds. Companies should implement cash management policies based on models that allow businesses to make daily decisions that will allow them to achieve their desired levels of liquidity (Salas-Molina, Rodriguez-Aguilar, & Pla-Santamaria (2019). Management should incorporate policies that outlines how much money the company should have on hand, as well as who has the authority top open and transact on accounts. In addition to having controls in place, it is important for companies to reconcile their bank accounts. At the end of fiscal year 2020 D.R. Horton had over $3.4 billion dollars in cash on hand (D.R. Horton, 2021). The amount of cash the company has on hand is not too much for the industry. According to Porter & Norton (2018) companies who do not have appropriate controls in place are subject to questionable accounting practices that can lead violations of the Sarbanes-Oxley Act of 2002. D.R. Horton needs to have a large amount of cash on hand to ensure the company can support every region it builds in, as well as make necessary investments in a timely manner. If the company maintained less cash on hand, they could miss out on land investments and other operating opportunities related to the homebuilding industry. A real-life example from a work situation I can think of is my current employer. Credit unions are regulated by the National Credit Union Administration (NCUA) and required to have internal controls in place to ensure employees are not embezzling from the company. The credit union has software in place to detect unusual activity on a member’s account and is audited annually by an independent auditing firm. The controls in place address corporate credit cards, cash on hand, wire activity, and any other financial authority that comes with being in certain roles. References D.R. Horton. (2021). D.R. Horton, Inc. and Subsidiaries Annual Report. Retrieved from https://investor.drhorton.com/~/media/Files/D/D-R-Horton-IR/reports-and-presentations/reports/2020-dhi-annual-report.pdf
Answer preview to Cash management can be used to control cash by establishing thresholds relating to how much money a company maintains in certain accounts and who can access those funds.
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