Ocampo: Optimizing the use of cash in the bank


ALL the cash collections of the business should be in the bank except of course for the Petty Cash Fund that is kept in the business premises. Cash is kept in the bank for different purposes; and that is why they are kept in two (2) types of bank accounts, i.e., the savings and the current accounts. Cash in Savings Accounts are meant to hold cash collections and defray Operating and Capital Expenditures estimated for about three (3) months; while cash in the Current Accounts are meant to fund clearing checks for the day.

Cash collections are immediately deposited in a bank Savings Account, and this becomes an Operating Fund; meaning a fund that will be available to defray estimated Operating and Capital Expenditures within the next three months. Every day, the amount of incoming checks issued by the business to suppliers and various payees that will undergo the bank clearing during the day is transferred from the Savings Account to the Checking Account. This is a routine work of the Treasury Section in coordination with the Accounting Section who has the needed information on collections, deposits and check disbursements. This will run the business and keep it going.

However, this may not be enough to run the business successfully. Some recommendations are the following:

1. Cash collections should be immediately deposited in the bank. Cash is worthless if kept in the vault. They will be productive if they are in the bank.

2. Monitor each bank account in the Books of the business by maintaining an Account Title for each account. A Savings Account opened in “Green Bank” with Account Number 372-52890-11 should be shown in the Chart of Accounts as “Cash in Bank (SA) – GB 372-52890-11; while a Current Account opened in the same bank in Account No. 361-41701-12 should be shown as “Cash in Bank (CA) – GB 361-41701-12 ”.

The bank also maintains separate ledgers of your savings and current bank accounts. This will enable the bank to keep track of your savings and current account transactions; and so that the transactions and balances in each ledger can be reported to the depositor thru the Bank Statement and Savings Passbook for reconciliation with the depositors own records. This will make possible the so called Bank Reconciliation.

3. Arrange with the bank for a low maintaining balance for each bank account. This will free up funds that can be more profitable if used in operations.

4. Apply for a “Bills Purchase Line”. A BP line is an approved amount extended by the bank that will allow the business to use or access said fund without waiting for customers’ checks to clear.

5. Prepare an Annual Operating and Capital Expenditure Budget that shows the committed volumes and revenue and planned spending each month. This will enable the Treasurer to prepare a Cash Flow Forecast that will be adjusted daily for more realistic assumptions

6. Require the Financial Analyst of Treasury to prepare a Daily Cash Flow Projection. This entails knowing the beginning balance in the bank and the amount of collection that will be deposited by the Cashier in the Savings Account and determining the amount of checks that are dated during the day.

The Analyst may even go to the extent of calling payees holding significant amounts of released checks to confirm if the check will be deposited during the day. This will help lower the Average Daily Bank Balance (ADB) that will be reported to management at the end of the month. A high ADB means that the use of cash in the bank can still be optimized.

7. Determine if the Cash in Bank Savings Account has excess funds that will fund at least three (3) months of business spending so that the excess and idle funds can be invested in Short-term Placements or even long-term investments.

8. Maintain a separate Savings Account (or short-term placements) for restricted funds. Restricted funds may include funds for approved capital expenditures, dividend declarations, retirement funds and remittance obligations to government agencies such as SSS, Pag-ibig and Philhealth.

9. The Cash Flow Forecast should show either an excess or deficiency in cash to meet operating requirements. This should prompt management to decide on the course of action to take. It may either be in the form of securing a loan, intensifying collection of receivables or cutting on costs.

Other big companies even resort to holding the payment of suppliers of products and services for 3 or more months just to fund operations or augment business expansions. It is to me an unethical business practice. Anything unethical does not conform to my business philosophy.

Cash will fuel your business. Similar to gas and diesel, cash can be optimized thru efficiencies. A businessman just needs to always look and innovate to look for those efficiencies.


Joselito R. Ocampo, a Certified Public Accountant, a Doctor in Public Administration and an Entrepreneur, is the Managing Director of J.R. Ocampo Consulting and Professional Services. He is a former Internal Auditor and Finance Manager of Coca-Cola Bottlers Philippines, Inc. for 20 years, and a former Senior External Auditor of Sycip, Gorres, Velayo & Co. for 6 years. He also served as City Councilor of the City of San Fernando, Pampanga for 2 terms. He is a former teacher and is now a Trainor of Business and Finance Management Trainees. For queries and comments please call 0917-5057341 or e-mail at

JCPS is offering a continuing FREE Bookkeeping, Accounting, Auditing and Business Management Seminars – a ten (10) module “Basic Business Management Training Program” designed for businesses, entrepreneurs, employees and senior students. For interested participants, please e-mail or call us in the above e-mail address or number or like us in our Page: JCPS Seminars. The Program is our Firm’s commitment to Excellence.


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