Cash balancing calculations are important to understand when completing cash management. It is recommended that cash balance swaps are made weekly, if not daily, to maintain an accurate and up to date record. Below are example cash management calculations created using three funds, three investment strategies, and three accounts.
| Funds | Investment Strategy | Investment Strategy Account |
| Endowed Fund #1 | Short Term Investments | Short Term Investment Pool |
| Endowed Fund #2 | Long Term Investments | Long Term Investment Pool |
| Endowed Fund #3 | Checking | Bank of MT - Checking |
Each investment strategy was configured to allocate 100% of a fund's assets to the account defined in the investment strategy (see example below).
Prior to running cash management, each fund had the same fund balance (+/- $0.02) and each fund's assets were distributed in the same manner between the Bank of MT - Checking account and Short Term Investment Pool account. Additionally, each fund was assigned the Bank of MT - Checking account as the fund's default checking account and an investment strategy (example below from Endowed Fund #2).
Suggested Swaps
To provide context for how balance transfers are calculated, first examine the balance swap suggestions from the example data. For the purpose of this example, the suggested swaps related to Endowed Fund #2, which are line items 2 and 3, will be the focus.
In the second and third line items, the balance swap is suggesting that the following amounts of money be moved:
- $5,000.00 from the Bank of MT - Checking to the Long Term Investment Pool account.
- $32,358.35 from the Short Term Investment Pool to the Long Term Investment Pool.
Within the cash management settings of Endowed Fund #2, the default checking account for the fund is set to the Bank of MT - Checking account; and the fund was assigned the Long Term Investments strategy, which is configured to allocate 100% of a fund's assets to the Long Term Investment Pool account.
The fund has $5,000.00 in the Bank of MT - Checking account and $32,358.35 in the Short Term Investment Pool account, so the system recommends that those amounts should be moved/swapped to the Long Term Investment Pool account.
For the purpose of this example, the suggested balance swaps were accepted by clicking Swap Checked Balances. At this point, the swapped balances have not actually moved money in the real world, nor do they affect the financial statement. The money was only moved within the system at a fund level.
For example, in the journal entry below, the system suggested that $5,000.00 from Bank of the West - Checking be moved into Long Term Investment Pool. However, the exact opposite entry was also booked into the Z_Cash_Balancing fund showing the net impact of the transaction is zero. This ensures that the transaction has no impact on the overall balance sheet until the money is transferred at the bank and the transfer has been recorded in the system.
Transfer Money
Once the suggested balances have been transferred, the Cash Balancing Fund Assets section on the Balance Swap page will update to reflect the dollar amounts held by the Z_Cash_Balancing fund for each of the asset accounts listed. The objective is to transfer money from asset accounts with a positive balance to asset accounts with a negative balance until the total of all Cash Balancing Fund Assets is $0.00.
In our example, $22,358.35 was transferred from the Short Term Investment Pool account to the Bank of MT - Checking account, and $37,358.35 was transferred from the Short Term Investment Pool account to the Long Term Investment Pool.
The resulting transfer clears out the Cash Balancing Fund Assets, and the balance transfer process is complete.