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.

On the collection side, lockboxes were used to receive cash receipts. The use of lockboxes enhanced collection time by more than two days on average daily collections. Assuming $100 million of managed float in the 1980s, with interest rates ranging in the high teens, peeking out around 19% ($100 million at 19% equals $19 million) that would go right to the bottom line.

Investments and borrowing for large corporations was primarily in the commercial paper market. Collected balances were used to pay for banking services and credit line compensation. As you may realize, this is just a very brief outline of what cash management was all about during this period.

I served a three-year term on the board of the National Corporate Cash Management Association. The name changed to Treasury Management Association while I was a board member. I was also one of the founders and a president of the Cincinnati Cash Management Association.

After retiring from corporate life, I worked for a Cincinnati bank for five years, primarily “selling what I used to buy.”

I have served as a director of MidUSA Credit Union for 18 years and currently serve as board secretary. MidUSA Credit Union dates back to 1934. As I mentioned, reading these articles about the evolution of the Federal Reserve and banking systems since 1990 brings back memories of the old physical presentment days. (The Federal Reserve float is dead.)

I decided to write this note after reading the Times and receiving a Christmas card from another cash management old timer, Ken Parkinson. Ken was the founder and editor of the Cash Management Journal.

Jim Kraft

Board Secretary

MidUSA Credit Union

Franklin, Ohio

Instant Insights /

The Evolution of Cash Management

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