CASH MANAGEMENT

BY : ANJANA RAI
ROLL NO :260137
DEFINITION
 CASH : Cash is the ready currency to which
all liquid assets can be reduced.
 NEAR CASH : Implies marketable securities
viewed the same way as cash because of
their high liquidity.
 TRANSACTION MOTIVE : Is a motive for
holding cash / near cash to meet routine
cash requirements to finance transaction in
the normal cause of business.
 PRECAUTIONARY MOTIVE : It is a motive for
holding cash / near cash as a cushion to
 SPECULATIVE MOTIVE : Is a motive for
holding cash / near cash to quickly take
advantage of opportunities typically
outside the normal course of business.
 COMPENSATION MOTIVE : Is a motive for
holding cash / near cash to compensate
banks for providing certain services or
loans.
OBJECTIVES OF CASH MANAGEMENT

 To meet the cash disbursement needs.

1. it prevents insolvency or bankruptcy arising out
of the inability of a firm to meet its obligations
2.the relashionship with the bank is not strained
3.it helps in fostering good relations with trade
creditors & suppliers of raw materials, as prompt payment
may help their own cash management
4. a cash discount can be availed of if payment is
made within the due date
5.it leads to a strong credit rating which enables the
firm to purchase goods on favourable terms and to maintain
its line of credit with banks and other sources of credit.
 To minimize funds committed to cash
balances: it minimises cash balances. It
aims at having optimum level of cash
balance.
CASH MANAGEMENT AT
ATMS
 REUIREMENTS : Electronic fund transfer
system.
Elecronic clearing
service.
ATM
 An automated teller machine (ATM) is
a computerized telecommunications
device that provides the customers of a
financial institution with access to
financial transactions in a public space
without the need for a human clerk or
bank teller.
 Using an ATM, customers can access their
bank accounts in order to make cash
withdrawals (or credit card cash
advances) and check their account
NECESSITY OF CASH
MANAGEMENT AT ATM
 There is significant increase in ATM usage in
recent years, financial institutions must address
management of cash funds in their ATM
networks in order to capture greater efficiencies
in revenue and stay ahead of an increasingly
competitive market.
 In order to stay at the forefront, sourcing an
optimal cash management solution that can
predict, plan and forecast usage to facilitate
efficient cash consumption and replenishment is
essential.
 Through cash management optimisation, ATM
network operators can effectively balance
 Some banks typically maintain as much
as 40 % more cash at their ATMs than
what's needed, even though many
experts consider cash excess of 15 % to
20 % to be sufficient.
 Cash-related costs represent about 35–60
% of the overall costs of running an ATM.
Through currencymanagement
optimization, banks can avoid falling into
the trap of maintaining too much cash
and begin to profit by mobilizing idle
 Therefore, it is very important to develop
advanced algorithms to accurately predict
currency demand for ATM.
 Based on cash demand forecasting an
intelligent cash management system can
then provide the bank the opportunities to
lower its operational expenses and improve
the return on its cash assets.
 The ATM networks are expanding strongly in
last time and the development of intelligent
systems for monitoring and optimization of
ATM networks becomes very relevant.
Existing approaches for ATM cash
demand forecasting and management
 The basic element in development of efficient ATM
cash management system is a cash demand
 forecasting model for every ATM.
 Generally this forecasting model is created based
on historical cash demand data.
 The historical cash demand for every ATM varies
with time and is often overlaid with non stationary
behavior of users and with additional factors, such
as paydays, holidays, and seasonal demand in a
specific area.
 Cash drawings are subject to trends and
generally follow weekly, monthly and
annualcycles. For example, people tend
to draw relatively large sums of cash at
the beginning of each month.
 Before Diwali, drawing rates soar,
whereas in August, during the summer
holidays, rates tend to drop considerably.
ATMs that are located in shopping
centres, for example, are most heaped on
Fridays and Saturdays.
 The development of the forecasting model is
complicated procedure, because it must consider
the changing behaviour of users and various input
variables.
 Based on the cash demand forecasting model the
optimization procedure determines the optimum
cash amount for each ATM by calculating the
transport and money upload costs against interest
rates.
 Cash management system has to guarantee the
availability of cash in the ATMs network, should
estimate optimal amount of stocked money plus
efficiently manage and control day-to-day cash
handling, transportation with reducing of currency
transportation and servicing costs.
 The system should be flexible enough to
allow the bank to re-forecast future
demand, perform WHAT – IF analyses, and
optimize the network as the cash
distribution environment evolves.
 Most known cash management systems
for ATM network are iCom (Carreker
Corporation), MorphisCM (Morphis, Inc),
OptiCa$h (Transoft International),Pro Cash
Analyser (Wincor Nixdorf), (Simutis et al.,
2007).
Cash supply optimization
procedure
 The proposed ANN-based algorithm predicts the
demand for currency at each ATM on an individual
basis. Then, by applying an optimization
algorithm, the cash position for each ATM is
determined. The cash supply optimization
procedure contains the following steps:
 • The amount of cash positions on every ATM is
monitored daily ;
 • Based on the trained ANN a cash demand for n-
subsequent day for every ATM is predicted ;
 If the cash position in ATM for next day is
smaller as required, the optimization
algorithm for cash upload is activated;

 • Using an optimization algorithm, the

optimal cash upload for ATM is estimated.
The algorithm searches for minimal ATM’s
maintenance cost function. This cost
function consists of cash costs (annual
interest rate), cash uploading costs and
constant ATM-service costs. We used
simulated annealing optimization method [6]
to estimate an amount of cash upload for
ATMs, which minimi-zes the ATM’s
 This optimization procedure that
determines the lowest cost of cash
distribution – based on accurate supply
and demand forecasting – provides the
oppor-tunity for a bank to lower its
operational expenses and improve the
return on its cash assets.
Cash Planning Advantages

 Reduces cost of operating an ATM

network    
 Equips bank or ATM network operator
personnel with a tool to avert idle cash in
ATMs and therefore, improves overall
network profitability    
 Allows to plan and optimise the work of
cash carriers and cash vaults as the
system recommends how much cash to
take, location to visit and at what time
 Improves customer satisfaction