Cash & Liquidity Management for Corporates

Cash & Liquidity Management

Cash and liquidity management is defined as the effective planning, monitoring and management of liquid and near liquid resources, and is one of the most fundamental responsibilities of the treasury function often featuring at the top of the treasurer’s list of priorities.

Optimizing the global cash position of an organization and mitigating operational risks related to payment activities is the overall goal of corporate treasury, but although these are well understood, they are often difficult to achieve in an efficient and cost-effective way due to several practical challenges.

Typical Cash Management Activities

Cash liquidity management fig 1


To overcome these and improve the cash and liquidity management process, there are a number of actions and solutions that a corporate treasury function could consider:

Cash visibility & mobility
One of the most common challenges we see being faced by Treasury functions is the inability to quickly and easily determine the global cash position for their organization. Being unable to identify the amount, currency and physical location of available cash can then further limit Treasury’s ability to move funds to where they can be most effectively utilized.

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Cash forecasting
Once the current cash position has been determined, the next step is to forecast future cash positions to pro-actively plan for any liquidity shortfalls or surpluses. Cash forecasting uses the current cash position as the starting point, and then layers on expected cash inflows and outflows to predict future cash positions. Often the challenge faced by organizations is the inability to forecast due to insufficient cashflow data received from the business, inaccuracies in those forecasts, or not having a suitable tool to process and present forecasts.

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Working Capital management
Working capital is essential to the health of every organization, but managing it effectively is a balancing act to ensure there is enough cash available to cover both planned and unexpected costs, whilst also making the best use of the funds available. Treasury functions often look to optimize their Working Capital Cycle (WCC), the time it takes to convert net current assets and current liabilities into cash. Long cycles mean tying up capital for a longer time without earning a return, whilst short cycles allow an organization to free up cash faster and be more agile. By understanding the causes of a long working capital cycle, it is possible to put in place several solutions to shorten it.

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Bank charges & Fees
A common and easy to fix issue for most organizations is that of banking fees. Because fees are normally linked to transaction volumes or charges per account, there are several solutions a treasury function can utilize to reduce banking fees across the organization.

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Interested in
cash & liquidity management?

Hugh DaviesJudith van Paassen
Get in touch with Hugh Davies or Judith van Paassen for more information about cash & liquidity management.