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Commentary

The Evolution of Cash Management

MidUSA Credit Unions board secretary recounts the days of lockboxes and the Federal Reserve float.

By Jim Kraft | Updated on January 14, 2016
Dear Editor,

I enjoyed reading the recent Credit Union Times issue, “Extra Special Times.” The articles about the cash management timeline starting in 1990 were very interesting. However, I can still recall some of the overall managing of cash prior to 1990. The evolution started way before 1990 (i.e., lockboxes go back to the late 1950s).

In the early 1960s, funding totals were deposited in disbursement accounts on the day the checks were issued. The funding took place even before the mailman picked up the mail. On average, these checks cleared the disbursement accounts six days after issuance. Managing “float” was a very profitable, rewarding experience. I had the responsibility of managing the cash flow of a Fortune 50 corporation for more than 28 years (from 1961 to 1990). One can imagine the reaction I created from the CFO and external auditors when I proposed funding disbursement accounts four to six days after the checks were booked. Daily overdrawn cash accounts were adjusted at the end of each accounting period in order to reflect positive cash balances. Our CFO used to say that the Treasury Department was the player and the accountants were the scorekeepers. Mail time between points, payee processing time and Federal Reserve clearing time were the basic elements of disbursement float. Primary disbursement vehicles were zero balance accounts, controlled disbursement accounts and payable thru draft accounts.

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