Recommend strategies a municipality might use if they run out of cash

Recommend strategies a municipality might use if they run out of cash

One of the strategies a municipality might use if it run out of cash is selling short-term investments. According to Ysmailov (2017), short-term investments are fiscal reserves that can be converted into cash within twelve months. A municipality’s short-term investments may include treasury bills and government bonds. Selling short-term investments would be the best for the municipality because it would not incur any debts that can later impact its financial performance. A municipality can also speed up the revenue collection process if it runs out of cash. The main sources of revenue for local governments are transfers from the government, property taxes, and sales. Speeding up the revenue collection process would be best for the municipality because it can accumulate as much cash as possible to fund its operations and consider other income-generating projects.

The third strategy a municipality can use to get cash is delaying payments to suppliers until the money needed to pay the suppliers is acquired. However, this strategy may damage the relationship between the municipality and its suppliers and its public service orientation. According to Chen et al. (2014), it is important to take great care when delaying suppliers’ payments to manage cash flow temporarily. Despite the negative impact that the strategy would have on the municipality, it would be best to address the issue of cash deficiency because it enables the municipality to redirect funds into other more urgent matters that can impact its performance. The fourth strategy is acquiring funding from financial institutions. The municipality may get a loan from a bank to fund the most important activities and investments that can generate income. This strategy is important because it enables a municipality to ask for any amount of money based on its credit status and ability to repay within the required time.

References

Chen, G. G., Weikart, L. A., & Williams, D. W. (2014). Budget tools; Financial methods in the public sector. CQ Press.

Ysmailov, B. (2017). Interest rates, cash and short-term investments. SSRN Electronic Journal. https://doi.org/10.2139/

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Recommend strategies a municipality might use if they run out of cash.

Recommend strategies a municipality might use if they run out of cash

Explain why those strategies would be best for the organization.