Cash management primarily means the proper collection and disbursement of funds. This is an important task because it is beneficial in maintaining the cash flows for any company. Conventionally, it was a paper-based system and entailed several risks like higher processing costs and security.

The cash management services have undergone significant changes. Banks think from the point of view of their customers and offer doorstep facilities for their customers’ benefits. Efficient services ensure effective collection and payment as well as accurate disbursals of cash.

An efficient cash management system has the following four benefits.

1. Reduces transaction time
2. Helps companies to increase their net profits
3. Decreases losses for businesses
4. Saves idle time for banking customers

Meaning of cash management system

An efficient cash management service is a process where the bank makes collections and payments on behalf of the customers. The entire procedure is quick and streamlined because of the banks’ wide network. Furthermore, the robust clearing infrastructure, specialised technology to provide timely and efficient management, and tie-ups with other banks are beneficial for customers.

Basic cash management services

• Receivables and collections management
• Advanced information technology (IT) solutions for providing customization
• Post-dated cheque management services
• Collection of cheques in bulk
• Multiple electronic funds transfer mechanisms
• Cheque purchasing facility

Management of payables

Under the cash management system, banks also offer the following payment management services.

• Refunds of investments made in Initial Public Offerings (IPOs)
• Interest and dividend warrants
• Issuance of bulk demand drafts for the bank as well as network banks
• Remote printing of various instruments like pay order or demand draft
• Writing cheques for network banks as well as home bank

Escrow services

Banks also offer escrow services for their customers. Some of these are as follows:

• Availability of escrow depository accounts facility
• Structuring transactions and deals with investment banks, clients, and lawyers
• Customised reporting and management information system (MIS) as per client requirements
• Dedicated team for completing complicated transactions, which includes legal officers and product managers

Modes of delivery

Banks provide cash management services to customers through the following two modes.

• Own personnel
The banks recruit personnel for providing these services to their customers

• Agents
Under this mode, banks outsource the services to external agents

Electronic fund transfers

• National Electronic Fund Transfer (NEFT)

Such transactions occur between the destination and transferring banks. These transfers may be done on all days except Sundays. The transactions are completed in twelve batches (between 8am and 7pm) on weekdays and six batches (between 8am and 1pm) on Saturdays.

Fees payable per transaction are as follows:

o Up to Rs. 10,000: Rs. 2.50
o Above Rs. 10,000up to Rs.1lakh: RS. 5
o Above Rs. 1 lakh up to Rs. 2 lakh
o Above Rs. 2 lakh: Rs. 25

• Real Time Gross Settlement (RTGS)

Such fund transfers are executed in real time without any waiting period. There is no limit on the amount that may be transferred through RTGS. However, users need to transfer at least INR 2 lakh (with no maximum limit) through this mode.

Fees payable per transaction are as follows:

o Above Rs. 2 lakh to Rs. 5 lakh: Rs. 25
o Over Rs. 5 lakh: Rs. 50

• Immediate Payment Services (IMPS)

Most electronic fund transfers occur through NEFT or RTGS services. However, these occur in batches, which may result in delays. To overcome this, the National Payments Corporation of India (NPCI) introduced the Immediate Payment Services (IMPS). This service is available to Indians and allows users to transfer funds through their mobile handsets. This inter-bank transfer service is available on all days for 24 hours.

Fees payable per transaction are as follows:

o Up to Rs. 1 lakh: Rs. 5
o From Rs. 1 lakh to Rs. 2 lakh: Rs. 15

Banks are focusing on providing better services to their customers. Cash management system helps customers reduce their risks and manage cash flows more accurately.

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Financial institutions provide credit to individuals to help them meet fund requirements, such as medical emergency, wedding, or a dream holiday. These loans are offered based on their credit history. The Credit Information Bureau (India) Limited (CIBIL) collects information from financial institutions to maintain credit scores for individuals across the country.

Availing of personal finance loans allows individuals to overcome any liquidity crises. However, before applying for the loan, it will be beneficial to know the procedure and the pros and cons of such credit facilities.

Understanding the loan application process

Most financial institutions in the country offer personal loans to individuals. However, the procedure may vary from one lender to another. Understanding the process and the rules and regulations of the institutions before making the choice is recommended. It is advisable to review the loan application form to comprehend the terms and conditions in order to make an accurate decision.

Here are four steps to follow before applying for a loan.

1. Check the interest rates

Each lender levies different rate of interest. Some institutions may offer fixed rates while others may offer reducing balance rate of interest. In the latter calculation, the interest is charged on monthly reducing balance determined after decreasing the Equated Monthly Installment (EMI). However, with a fixed rate, the interest remains the same during the entire loan tenure.

2. Determine the Equated Monthly Installment (EMI)

Lenders determine the loan amount based on the income of the applicants and their credit score. It is important to choose an EMI that may be repaid without facing financial constraints. It is advisable that all the EMIs do not exceed 50% of the borrower’s monthly income to prevent a liquidity crisis.

3. Understand the documentation

Some of the commonly required documents include an identity, age, and residence proof along with the duly filled application form. Furthermore, applicants may need to provide details of their income and bank accounts to the lenders.

4. Confirm the loan eligibility

Applicants must use a personal loan online calculator to determine their eligibility before applying for a loan. Any individual aged between 21 years and 58 years may apply for such loans. The minimum net monthly income must be at least INR 25,000 with two years of work experience. An online calculator will help borrowers to know the approximate amount they may procure as a loan.

Having understood the loan application procedure, here are three benefits of applying for such loans.

1. Collateral not required

Unlike other credit facilities like home or auto loans, personal loans are unsecured. This means borrowers do not need to provide any personal asset as collateral against the loan. In case an individual fails to make timely repayments, the risk of losing the asset is eliminated with these loans.

2. Quick approval

These loans require applicants to submit some basic documents for receiving approval. Furthermore, these are unsecured credit facilities that make it easier for lenders to sanction the loans. Since the loan approval is primarily based on the credit history of the applicant, an easy personal loan is disbursed within a short period of time.

3. Affordability

Contrary to belief, these loans are available at competitive interest rates. Furthermore, the processing fees and other charges are nominal, which makes it affordable for individuals to avail of these credit facilities.

Personal finance may be used for any legal purpose. This provides flexibility to the borrowers without limiting the use of these funds. Several financial institutions offer these loans and provide loan-related information on their websites.Individuals must conduct extensive research and review these details in order to land the best deal.

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A 25-year old is done with college and is probably into his first job. At the threshold of adulthood, he wants to fulfill several dreams in a short period of time. Most people believe that having a credit card is an important factor of becoming an adult. However, there are many individuals who think such cards are unnecessary. Just like investing is not necessary, having a card is also not a necessity. So then why would a 25-year old need one?

Here are five reasons why having a credit card at the age of 25 is beneficial.

1. Deposits are Not Necessary

Some merchants who accept debit card payments require the customers to also pay a higher deposit at the time of booking. In case a person is unable to execute the plans, the merchants are still able to earn some of their cash deposit amounts (because there fund is done after deducting a certain sum). These are similar to security deposits and may become inconvenient. A credit card eliminates all such difficulties for the users because merchants do not require deposits for such transactions.

2. Deferred Payment

When an individual uses a debit card to purchase any product or service, the money is immediately deducted from his bank account. On the other hand, a credit card purchase does not have to be paid until the next payment due date. For example, if a cardholder purchases something using his card on the 1st of a month and billing due date is 31st of the month; he enjoys an interest-free period of 30 days. Although this may not seem like much, being able to make purchases without the need to pay upfront cash may help users save a lot of money over a longer period of time.

3. Affordable Home Loan Interest Rates

Many people think that they may receive better discounts and close a home purchase faster if they pay in cash. However, if a person has used his credit card responsibly and made timely payments, this is reflected in his credit score given by a credit rating agency like Credit Information Bureau (India) Limited (CIBIL). A higher credit score is beneficial in reducing the interest cost on home loans and other types of borrowings. This makes it less expensive for people to buy their dream home. Furthermore, paying the mortgage installment with a card reduces the actual cash outflows and helps prevent financial difficulties.

4. Reward Points

Most card companies provide excellent reward-based credit cards for their customers. These issuers allow the cardholders to accumulate reward points on their spending. These are redeemable against several offers, such as travel deals, air miles, or purchasing some products and services. In addition to the reward points, users may enjoy cashback offers and benefit from signup bonuses that make credit cards more beneficial.

5. Develop Credit Score

A 25-year old may not have any credit history. However, he may need to avail of a loan in a couple of years to purchase a home or any other asset. This period may be used to develop a good credit score using a credit card. When an individual utilizes his card responsibly and has no delays in payments, it has a positive impact on his credit score. Having a strong credit score has several direct and indirect benefits, such as increased possibility of receiving approval on loans and lower interest rates.

People often find lots of information on how using a credit card may have severe outcomes, such as financial distress and debt traps. However, using a card wisely also has many benefits. However, before applying for a credit card, it is important to check credit card eligibility and understand the terms and conditions related to credit cards.

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When creating financial goals and setting a budget, most folks understandably have questions about personal finance topics such as cutting back on expenses, how to save, what investments are best and how to get out of debt. These subjects are important because very few individuals have an unlimited income stream, and most face competing demands for their paycheck.

Regular monthly bills, such as rent, utilities and groceries often take up a good portion of the budget. It’s also wise to not spend every penny that one earns, but, instead, to hold on to a portion of it in order to have the funds available to save, invest and pay off debt. With all of these competing demands and only limited money in a budget, it’s difficult to decide which goals are the most important.

This is especially true when it comes to planning how much money to spend and save and which personal financial goals should take priority: investing or paying off debt?

Why Investing for the Future is Important

There are many types of investments one can make, and they run the gamut from stocks, bonds, commodities and real estate to mutual funds, 401(k) plans, annuities and even notes held against corporate, private and public debts. Basically, anything whose ownership can be acquired, either in part or whole, and later sold if one so chooses, is an asset which might grow in value over time and in which others can invest.

Investments are attractive because they offer the potential for growth. This is why it is a wise financial move to set aside a portion of one’s money for investment. However, it’s difficult for most individuals to find room in their budget to be able to save up enough money to invest, especially if they happen to already have a lot of debt, since debt and other spending eat into cash flows.

The High Cost of Debt

According to information about household debt from the U.S. Census Bureau, nearly 69% of all American households had some form of debt in 2011, the last year for which comprehensive data is available from the agency. The median amount of debt that they hold is around $70,000. Debt is a significant issue for most Americans, as debt payments often consume a major portion of the budget.

In addition to holding individuals back from being able to invest, it can also prevent them from being able to save for other goals, such as college tuition, a down payment on a home and saving for retirement.

When Debt is a Good Thing

While debt can take up a large portion of many folks’ budgets, not all debt is necessarily bad. For example, most people are unable to buy a home unless they pay for it over time through a mortgage. Other times, loans can be a real benefit if they improve one’s cash flow, such as taking out quick installment loans in order to consolidate several smaller loans or credit card balances.

When used to consolidate debt, this type of loan can help individuals to reduce the amount of interest that they pay over time on expensive revolving debt. Once all of the debt has been combined through consolidation, it also decreases the number of minimum monthly payments that must be made to keep accounts current, which is especially helpful for people who have several small debts that may require $50 to $100 or more in minimum monthly payments.

In this way, a simple installment loan often helps individuals to be able to shake debt more quickly and free up a significant amount of their cash flow each month which they are then free to save, invest, or spend elsewhere in their budget.

Balancing the Need to Pay off Debt vs. Investing

Since many investments tend to grow in value over time, especially classes of assets that involve the payment of interest, it’s always a good idea to regularly commit even a very small portion of the budget to investment, even when there is significant debt. Deciding how much to save for investment, and how much to save to pay down debt will depend on the constraints of the individual’s budget.

There are a number of popular budgets, but many financial experts, including Senator Elizabeth Warren who is Special Adviser for the Consumer Financial Protection Bureau, recommend the 50-30-20 budget.

In this budget, payments to meet needs such as housing, transportation, and other expenses are limited to 50% of the budget. The other half of the budget is divided between spending on wants, such as entertainment and savings that are used to pay debt and invest.

Deciding how to divide 20% of the budget between debt repayment and investing is the tricky part. It’s a good idea to always be putting something towards investing, but when the amount of interest on the debt is significantly larger than the interest that one can earn on an investment, it’s better to pay down the high interest debt first, and then slowly increase the amount earmarked for investments.

It’s also important to note that one doesn’t have to spend 30% of their budget on one’s “wants.” By reducing discretionary spending, even in the short term, it’s possible to free up additional funds to pay down debt so that there is always more room in the budget for investing.

Rather than avoiding all debt, properly managing it, such as using an installment loan to consolidate debts made at higher interest rates, gives borrowers options and enables most individuals to be able to meet their needs, indulge their wants and have enough money in their budget to both repay debt and invest at the same time.

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Saving for our future is one of those things we all know we should be doing. However, whether we actually get around to it is another point entirely. It is so easy to just put off sorting out for another day. But when the time comes for you to retire, you will need to have some kind of plan in place for your next steps. Chances are you will have been putting money into a pension scheme in addition to the workplace pension you will be entitled to receive. But, what do you do if this isn’t enough to tide you over? With other financial issues looming over us as we approach retirement age, such as whether you have the best life insurance policy, our retirement funds should be the least of our worries. If you are thinking about investing your pension fund, don’t rush into it. We all want to enjoy our retirement, but make sure that whatever you are investing your money in is right for you.

Property investment

Real estate is quite literally hot property these days. If you’re looking to invest your pension somewhere, look no further than the real estate sector. The best way to go about this is by acquiring property through a real estate IRA. This way, you open yourself up to unique investment opportunities and you can be sure that you are putting your money into a secure asset. It also has the added benefit of being able to rise in value, which is perfect for if you are hoping to pass the property down generations. You also don’t need to be restricted to houses or apartments when investing with an IRA. You can also claim farmland or holiday resorts, or commercial property such as shopping malls.

Stocks and shares

The stock market might initially seem like a bit of a daunting minefield. But, it could be the perfect place for your pension to go if you have chosen to self-invest. In fact, in provides a great opportunity to protect against rising inflation and bring in higher returns than cash and bonds. You can go into ‘direct investment’ into the stock market via a stockbroker. This essentially means that you buy shares in a single company, which makes you what is known as a shareholder. If you want to minimise the risk associated with investing in stocks and shares, instead consider investing indirectly. This way you can invest your money in a number of different companies rather than just one.

Precious metals

This may appear unusual at first, but precious metal investment has soared in recent years. They are a hard investment, which means that they are also hedged against inflation. If you are looking to invest in precious metals, you will need to comply with the rules and regulations set up by your pension account. Gold, silver, palladium and platinum are all approved by IRA accounts. You will need to purchase the metals yourself through a dealership, and then keep them in an approved depository.

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