Unit 15 Cash Management and Credit control

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:26AM in AAT student discussion
Please help I am stuck on this one question
The management of cash balances in public Sector Organisations different from Private Sector Organisations ?

my email address is katlloyd26@hotmail.co.uk
Many thanks

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Hi Katherine,
    I am stuck on same question. If you found any information regarding question, could you please forward it to me.
    Thanks,
    Mik
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    This topic seems to be more interesting for regular college classes rather than anyone on a distance learning or a fast-track private college course.

    In both my classes there are students from local government. In previous years there have been students who worked for the NHS or MOD. If you work in practice or work in a commercial organisation it is quite an eyeopener to hear how public sector firms have limits placed on them.

    Short term investment of cash balances is a balancing act of return and risk.

    Invariably the cash has been earmarked for some use in say 6 months time (may be even later this month) but you want it to earn something for you while you have it. (the return)
    And you want to be pretty sure it doesn't disappear before you need it. (your attitude to risk)

    So you will look round for an investment that lets you take your money back when you want it (keeping the risk of losing it low) and paying you back more than you put in (giving you a return).

    I would look at commercial deposits in banks etc but for a public sector organisation the risk part is so important that they propbably have a policy that rules out even well known banks because they are not solid enough. So they will have a short list of where surplus funds can be lent to which aims to ensure that council taxpayers will not have to face the risk of the cash being lost.

    Shares in blue chip or other firms are often ruled out. In the case of West Sussex County Council, I think that bank deposits exclude Abbey and Barclays but do allow the Royal Bank of Sotland and HSBC.
    if anyone reading this knows differently please say so as I have no intention of putting down any of these organisations

    So going back to:
    The management of cash balances in public Sector Organisations different from Private Sector Organisations ?

    The issue is risk and Public Sector Organisations will have policies to avoid as much risk as they can and as a result they limit the level of return they can obtain by investing cash balances.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Dear Sandy,
    Many thanks for your help. Hopefully it will help when answering the question.

    Mik
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Thank you very much for your help and time
    Katherine
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Hi Sandy - thanks very much for this posting, the only thing I hadn't covered, it came up and I passed!!! :shock: :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    HI Sandy
    Sorry if this sounds thick... but have just read your notes on public sector, as I havent covered this, and there may be possibility of this being in my exam next week, could you please put it in simpler terms, ie, definition of it etc...
    If easier, could you just p'mail it to me please! Thankyou
    Mrs D.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Hi

    All I wrote was that public sector has many goverment regulations they have to consider when budgeting there cash as they are funded. Whereas private sector don't have as many regulations and may distribute funds as they feel needed
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    thankyou for that... will remember that in there!! will be glad when done sim as will be a step nearer to June... then its all over with... well all being well.

    Take care have a good weekend.... :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Unit 15 Cash Management and Credit control

    Short term cash deposits are a way of earning interest, but just as you might worry about getting your money back if you lent it to a dodgy acquaintance, so do businesses.
    Public Sector organisations have an obligation to be more careful than those in the private sector. They are handing tax revenues.

    So the threshold of risk is higher.

    Cash balalances held by public sector organisations can only be invested in places thought to be near risk free.

    So whereas you or I might consider even high street banks such as Barclays as very low risk and a safe place to put our money, that liyyle bit of risk they present is too much for at least one public sector organisation.

    Mrs D. The key is risk
    If you have responsibility for funds in the public sector you should invest them where the risk of losing them is as low as possible.

    I hope that makes it a little clearer

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