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Treasury Management
Cash Management
Cash management is the corporate process of collecting, managing and (shortterm) investing cash. A key component of ensuring a company's financial stability and
solvency. Frequently corporate treasurers or a business manager is responsible for
overall cash management (Investopedia,2016).
Treasury Department
The treasury department is responsible for a companys liquidity.
The treasurer must monitor current and projected cash ows and special
funding needs, and use this information to correctly invest excess funds,
as well as be prepared for additional borrowings or capital raises. The
department must also safeguard existing assets, which calls for the
prudent investment of funds, while guarding against excessive losses on
interest rates and foreign exchange positions. The treasurer needs to
monitor the internal processes and decisions that cause changes in
working capital and protability, while also maintaining key relationships
with investors and lenders.
Ultimately, the treasury department ensures that a company has sufficient
cash available at all times to meet the needs of its primary business
operations (Steven Bragg, 2010).
Roles of the Treasury Department range from:
Cash forecasting
Management advice
Working capital
management
Cash management
Bank relationships
Investment management
Fund raising
Treasury risk
management
Credit granting
Cash Payments
Inbound cash payments tend to be very small transactions, though
possibly in very high volume, especially in retail situations.
Cash Forecasting
Cash forecasting is absolutely crucial to the operation of every
organization. If there is ever a cash shortfall, payroll cannot be met,
suppliers are not paid, scheduled loan payments will not be made, and
investors will not receive dividend checks. Any one of these factors can
either bring down a business or ensure a change in its management in
short order.
Cash Forecasting Model
The core of any cash management system is the cash forecast. The
model is based on the receipts and disbursements method, which is
primarily based on a combination of actual and estimated receivables and
payables
Cash Concentration
Larger companies with many subsidiaries, especially those
with operations in multiple countries, maintain a significant number of bank
accounts. This is an inefficient arrangement from the perspective of cash
management, since the treasury staff must track all of the individual
account balances. With such highly fragmented cash balances, it is
extremely difficult to repurpose the funds for either centralized payments,
debt paydown, or investments.
An excellent solution is cash concentration, where the cash in multiple
accounts is pooled. Pooling can be achieved either through physical
sweeping (where cash is actually moved into a concentration account or
master account) or notional pooling (where funds are not actually