What is Cash Concentration?
Cash concentration is the process of consolidating funds from multiple bank accounts into a central, or master, account. This helps organizations manage cash more effectively by centralizing control over disbursements, investments, and liquidity.
For example, a municipality might have separate accounts for different departments or revenue streams (ex., parks and recreation, utilities, grants). Through cash concentration, funds from these individual accounts are transferred to a central account, usually daily.
What is a Cash Sweep?
A cash sweep is an automated transfer of excess cash from a checking or operating account into an investment or interest-bearing account (such as a money market fund or a repurchase agreement) once a predefined threshold is met.
Sweeps are typically performed at the end of the business day to ensure that idle cash isn’t sitting in non-interest-bearing accounts overnight.
How Does Cash Concentration Work?
Cash sweeps operate through:
- Threshold-based automation: The account is monitored for balances exceeding a set threshold.
- End-of-day execution: Excess balances are moved into pre-approved, short-term investment vehicles.
- Return optimization: Sweeps help generate earnings on idle cash without requiring manual transfers or active investing.
Some organizations also implement reverse sweeps to bring invested funds back into the operating account when needed.
How Does Cash Sweeping Work?
Cash sweeps operate through:
- Threshold-based automation: The account is monitored for balances exceeding a set threshold.
- End-of-day execution: Excess balances are moved into pre-approved, short-term investment vehicles.
- Return optimization: Sweeps help generate earnings on idle cash without requiring manual transfers or active investing.
Some organizations also implement reverse sweeps to bring invested funds back into the operating account when needed.
What’s important here?
Cash concentration and sweeps are foundational techniques for improving cash visibility and maximizing liquidity. Cash concentration centralizes funds from multiple accounts into one, while cash sweeps automatically move excess balances into interest-bearing or investment accounts.
Together, these tools help government and nonprofit teams reduce idle cash, increase control, and support more strategic financial decision-making.
