Treasury Edge

I describe cash management as an art because there are no rules or blueprints to follow. To be a great cash manager you need to learn the intricacies of the flows throughout the business. In a recent conversation where I was training a colleague to do the daily cash management process I was asked, “How am I supposed to know what looks odd, or when I should act?”. There’s no shortcut to mastering this process, it is looking at the forecasts and the accounts, speaking to the business every day and learning this for yourself. There are certain requirements every month, of course, payroll being the main one, but there are many other ‘one-offs’ that you can’t predict but you can prepare for. 

Let’s step back, what is cash management? 

Cash management is the strategic process of overseeing and controlling the flow of money in and out of a business. It involves optimising the use of available cash and making sure it is in the right place and the right currency to meet financial obligations, and investing excess in deposit, accounts, money market funds or other investment vehicles. It is also being knowledgeable on the cash position and being ready to advise the decision makers on what can or cannot be done with the cash available. 

Key Principles of Cash Management

Forecasting and Planning:

  • Learn how to develop accurate cash flow forecasts to anticipate potential shortfalls or surpluses.
  • Understand the significance of strategic planning in aligning financial goals with available cash resources.

Optimising Receivables and Payables:

  • Explore strategies to expedite receivables and ensure a steady stream of incoming cash
  • Implement effective payment management techniques to enhance liquidity without compromising vendor relationships

Investing Idle Cash:

  • Discover prudent ways to invest idle cash to generate additional income.
  • Evaluate risk-return trade-offs to make informed decisions on short-term investments.

Tools and Technologies Available 

Digital Banking Platforms:

  • Explore the benefits of leveraging digital banking tools for real-time monitoring and control of your cash flow.
  • Understand how automation can streamline routine financial tasks, allowing you to focus on strategic decision-making.

Cash Flow Management Software:

  • Review popular cash flow management software options that provide insights, analytics, and reporting capabilities.
  • Learn how these tools can empower you to make data-driven decisions for improved financial performance.

To Sum Up

Effective cash management is a skill that can easily be learned and is essential to master as a treasurer.  By understanding the key principles, embracing tech, and being proactive, you can make a big difference to your business contributing to creating a controlled finance function and even adding to the bottom line.

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