Articles on cash management

Cash Management - The Importance of Cash Management

By Kamarulzaman Baharom Why is good cash management system is vital to today's business environment? Every companies and enterprise must have more or less good cash management system in order to maintain company's cash liquidity so that it must always positive at all time. If not the cash manager must find a solution on how to finance the cash flow deficit. What are the cash manager's duties in order to execute his or her role effectively and efficiently? Here are the list of cash manager's duties according to Financial Handbook by Alexander Hamilton Institute Inc; 1. Bank relations 2. Debt management 3. Cash forecasting 4. Improving receivables processing 5. Speeding collections 6. Receipts forecasting 7. Maintaining liquidity 8. Short-term investing 9. Managing investments 10. Overseeing bank accounts 11. Reducing idle balance 12. Slowing disbursement 13. Cash conservation In 1997, just before the Asian economic downturn, I have decided that I wanted to be a company's treasurer or in other words to take care of company's cash management system. Even though our company was a public listed company, we still did not have a proper cash management system at that time. When I came across the Financial Handbook as explained above and find out the cash manager's duties, what I did was I listed all the duties in my new job descriptions. After a long process of developing the system, perfect it with actual corporate environment and sometimes taste a very painful lesson in executing the task. I have demonstrated and developed a complete system to all the duties listed above and fine tune the process so that it will interact beautifully and give a good report daily for my financial analysis. It takes more than 12 years to fine tune the process and I think its more than worth it to sacrifice my career in cash management.

One way to grasp the importance of cash management is to view cash as your most important resource. Your goal then is to ensure that your supply is always sufficient to the needs of your company. You may take advantage of discount offered by your suppliers because of your prompt payment to them or manage to earn extra income of your surplus fund as a result of your timely and correctly manage of your business cash flow. Cash Management - How to Prepare Daily Cash Position Report - Part 2 Business: Accounting Published: February 16, 2010 If your company maintained 2 or 3 banks for payment processing, we have to modify a little bit of the technique so that we can control effectively all the bank's accounts and at the same time manage to earn extra income by carefully invest surplus fund in short term investment. Lets assume that your company has 3 bank accounts and we name it as Bank A, Bank B and Bank C. We should choose one bank as your major bank where you pool all your cash in that bank. Cash Management - How to Prepare a Daily Cash Position Report - Part 1 Business: Accounting Published: February 16, 2010 As I have mentioned earlier, cash flow report is a very important report that every business owner or entrepreneur must be able to analyze so that they can plan for their next move in business. Almost all business gurus and academicians have stress on the importance of preparing cash flow report but unfortunately none of them give specific guide lines on how to prepare it. Cash flow report that we mentioned here is a dynamic cash flow report where it will show us the cash position at any point of time and at the same time can act as a powerful... Cash Management - Why We Should Know the Company's Cash Position Now Business: Accounting Published: February 10, 2010 The importance of knowing the company's daily cash position cannot be denied. It is a very important data in order for us to make a next move in business, whether to prepare payment for our suppliers or overhead expenses, invest our surplus fund in short term investment or just for our own knowledge so that we know we are in a right track and our financial position is in good health. Cash Management - The Importance of Cash Management Finance: Personal Finance Published: February 4, 2010

Why is good cash management system is vital to today's business environment? Every companies and enterprise must have more or less good cash management system in order to maintain company's cash liquidity so that it must always positive at all time. Cash Management - Cash is a King Finance Published: January 26, 2010 Everybody knows the phrase of "cash is a king". Is it true in context of the business environment today? Kamarulzaman Baharom's Expert Niches

Business Cash Management Tips

by: justingitia on Date: Sat, 4 Sep 2010 Time: 11:52 AM

Business cash management concerns cash collections, controlling disbursements, covering shortfalls forecasting cash needs, investing idle funds and compensating the banks that support these activities. Since overall cash flow involve tax and finance it is best for staff in tax and accounting department work closely together. Cash flow management require close coordination between the treasury and operations. Use of technology that captures accurate information on cash flow management is important in effectively managing todays volatile market. Effective cash flow management ensures every coin is at work either covering payment of cheques or producing income. The following are some of the best practices to manage cash flow: 1.Keep few bank partners Leading companies consolidated their financial accounts, using fewer banks. Through this they can depend on a few banks for the services and not a single bank so that should one bank have problems their operations are not affected. Consolidating bank accounts may bring in process efficiency. The company treasurer is able to keep tab line by line of banks transactions and can negotiate bank fees and procure preferential services. When shopping for bank keep cash management needs at heart by gathering inputs from all departments that will be affected by the choice of bank selected. Leading companies appoint a team of financial experts including bank relationship manager to determine how best a bank meets the companys needs and create detailed service level agreements with chosen banks.

2.Develop accurate cash forecasting methods Cash flows are uncertain and companies use forecasts to predict it by comparing receipts and disbursements. Best practice companies use models that give accurate figures. Sources of available quantitative and qualitative business intelligence range from shipping data and sales orders to buying patterns. Forecasts are based on seasonal, monthly, daily and cyclic patterns and trends. Forecasts can be explained as short term, medium term and long-term. Short term can track how a business unit fares, medium term aid in managing trends and seasonal price fluctuations, long-term forecasts help a company reach far reaching goals. Integrating information into the forecast as soon as it is available and using a rolling format helps the company to time disbursements to be funded by incoming receipts. Further, use of a rolling forecast, simulation techniques, and web-based treasury software can improve forecasting accuracy and see the company through cash-critical periods. 3.Increase investment yield at lowest risk and cost Companies develop investment guidelines on what is considered acceptable investments. A common understanding should be kept by the top managers on a portfolio of investment opportunities which can be exploited when opportunities become available. Alternatively a company may outsource an investment manager to carry out this exercise. Some companies find this more cost effective especially for a small portfolio. In addition leading companies avoid funds sitting idle in non-interesting bearing accounts by making use of sweep account and zero balance accounts. Sweep accounts allow companies to move idle cash into overnight investments at the end of each end of business day. 4.Evaluate cash management structure regularly Frequent review routine management structure need to be conducted to identify process that require to be improved, provide a tracking measure and provides assurance that the company data is reliable. Reviews check how bank manage the bank cash, their charges and yields on investment. To gather this information the company puts together a combine questionnaire and visit on site the bank partner. It is best to prepare the questionnaires before site visit. 5.Create a centralized cash management structure that serves global needs. Cash flow management is made complex for entities with operations n more than one country. Overall cash management operates on two levels. To begin with each

countrys cash management system, addressing standard treasury functions like collections within national borders. The second is a network that connects the domestic systems and various currencies while integrating cash management with functions such as purchasing, sales and accounting. Centralizing cross-border treasury operations activities is best done gradually. Companies can centralize within each country before centralizing cross-border activities or vice versa, again, based on the specific needs of each company. Physical cross-border transfers of funds are kept to a minimum to reduce funds movement. Instead, many companies use multicurrency accounts, netting, and pooling. Traditionally, companies purchase international cash netting services from banks to lower transaction fees and reduce foreign exchange expenses. Netting reduces the transfer of funds between subsidiaries to a net amount. Leading companies also establish in-house payment factories to manage accounts payable for their subsidiaries. Payment factories allow companies to net and bundle payments, lowering the number of transactions and transaction costs. 6.Automate financial reporting to drive efficiencies Companies are quickly realizing the benefits of automating financial reporting processes. Reasons include process efficiencies that are integral to many treasury systems, and the high risk involved with spreadsheet accounting--both of which contribute to a lack of internal financial controls. These problems can invite budget shortfalls, audit exposure, loss of stakeholder trust, and even government intervention. The innovative technological alternatives now available to generate accurate, complex financial deliverables include web-enabled treasury systems for global cash management and international reporting taxonomies such as extensible business reporting language (XBRL). XBRL is a standards-based method that allows users to exchange and compile financial information across all technologies. These solutions can facilitate collaboration and data sharing, resulting in faster and more accurate financial reporting, more effective reporting controls, and cost savings in every area of cash management. Financial managers are better able to focus on relationships with banks, trading partners and customers, and users have real-time access to accurate business unit transaction activity. These benefits promote better overall financial decision making and help a company gain or maintain a competitive edge.

FEATURED ARTICLES ABOUT CASH MANAGEMENT

NEWS Further rate hike of 50 to 75 bps likely: Aditya Puri, HDFC Bank June 14, 2011 | ET Now Aditya Puri, chief executive at HDFC Bank, long recognised that the Indian market will be consumer-driven and it remains so. It is dominant in everything related to consumers . In an interview with ET NOW , Mr Puri says he now aspires to be Number 2 to State Bank of India, even in the hinterland. Excerpts: Policy Action Policy rate hikes between at best 50 and 75 basis points should be expected till inflation comes under control.

NEWS Cash management September 25, 2009 With reference to the article 'Cash is not only king, it's strategic' (ET, Sept 23), Indian companies have a history of managing cash less efficiently. They keep issuing IPOs leveraging on the company brand name. One needs to closely look at balance sheet and income statement of a company to see how well it is managing its cash. Anand Prakash Anand, September 24 NEWS Cash management tools come in handy for FM March 7, 2003 | J Padmapriya , TNN NEW DELHI: Union Finance Minister Jaswant Singh has taken a leaf from the housewife's book to introduce cash management principles in the Budget. In vogue in most countries, cash management will be put in place for high-spending ministries like rural development, fertiliser, food, agriculture, human resource development and health, sources said. These high-budget departments together command a public spending allocation of Rs 34,967 crore. The spending by these funds-flush departments amount to over one-fourth of total gross budgetary support to the Plan. NEWS Barclays launches 'Easy Cash Management Solution' May 6, 2009 | PTI

MUMBAI: Global banking major, Barclays on Wednesday announced the launch of 'Easy Cash Management Solution' in India, a service that would enable clients access to a slew of customised products. The bank would offer three products -- direct debit, invoice matching and reconciliation and post dated cheque management -- under the solution and the services will be linked through internet banking, a press release said. "With the launch of 'Easy Cash Management Solution', we now have the most comprehensive offering designed to make commercial banking an exclusive experience," Barclays Global Retail and Commercial Bank's Managing Director, India, Samir Bhatia said. NEWS Cash management: Step one on business ladder August 6, 2003 | Pragna N Kapadia A few months back, Pooja started a nursery school to make good use of her free time and at the same time earn some money. Since it was a small operation, she managed it on her own and did not appoint any cashier to oversee the financials. At the end of the first month, she had Rs 50,000 in her current account. But after another few months, she was left with only Rs 3,000 in her account, which was not even enough to cover her monthly bills. Like Pooja, if you've been dreaming of having your own business, don't plunge into it without adequate cash management. NEWS Shop for trucks at Shriram auto malls soon September 4, 2010 | Ahona Ghosh , ET Bureau MUMBAI: You wouldn't expect a truck financier to get excited about planning a beauty pageant. But R Sridhar , MD of Shriram Transport Finance, is organising not one, but 60 of them. Only, there won't be any long-legged models, but used-trucks rumbling down the ramp. Come October 2010, a 3-4 acre auto mall , with a gallery to accommodate 250 bidders and a yard to house hundreds of refurbished trucks, will spring up on the outskirts of Chennai. "Every vehicle will be shown off like a bride," says Sridhar. NEWS Liquid funds have a lot more to manage now August 18, 2006 | Muthukumar K & Nishanth Vasudevan , TNN MUMBAI: Liquid funds' assets under management (AUM) has doubled in the past four months as rising interest rates has made this class of debt funds attractive for corporates and banks to park their short-term money. The assets under management by liquid funds have touched Rs 1,24,463 crore, with net inflow of Rs 15,517 crore in

July itself, as per Association of Mutual fund of India (AMFI) data. In contrast, gilt funds' AUM shrank 26% during the four month period to Rs 2,323 crore. NEWS Blackstone to acquire securitrans for Rs 150 cr June 9, 2011 | Paramita Chatterjee & Pramugdha Mamgain , ET Bureau NEW DELHI: Private equity firm Blackstone is acquiring the cash management arm of security services provider APS group Securitrans India Pvt Ltd for close to Rs150 crore, said a person with direct knowledge of the development. The acquisition is subject to regulatory approval. This comes close on the heels of a recent joint venture between Prosegur, the world's secondlargest private security company by market capitalisation and Delhi-based Security and Intelligence Services (SIS) NEWS Tax reforms will help stem black money flow: Finance secretary June 15, 2011 | Hema Ramakrishnan , ET Bureau Sunil Mitra has hardly been able to keep his head above water since he took the hot seat in the revenue department a few weeks before last year's Budget. The mandate for his team had gone beyond just tax collections after the Supreme Court and civil society criticised the government's failure to tackle the menace of black money. That has meant Mitra's team is working overtime to ensure the return of ill-gotten money stashed overseas. The task is far from easy. NEWS Spanish security major joins hands with SIS May 26, 2011 | Paramita Chatterjee & Pramugdha Mamgain NEW DELHI: Prosegur, the world's second-largest private security company by market capitalisation, is forming a 49:51 joint venture with Delhi-based Security and Intelligence Services (India) to offer cash management solutions primarily to Indian banks, financial institutions and organised retail firms. The Spanish company will invest around 98 crore for 49% stake in the JV, said a person familiar with the development. As part of the transaction, SIS will demerge its existing cash management services business in the country into the JV firm, the person added.

The Do's and Don'ts of Cash Management

By: Bronwen Roberts Working capital is a highly effective barometer of a company's operational and financial efficiency and effectiveness. The better its condition, the better placed the company is to focus on developing its core business. The early, primitive attempts at maximizing cash management can be traced back to the late 1970s. Unbelievably, there are still some companies who haven't yet understood that putting cash trapped in the balance sheet to better use can give them a competitive edge over their rivals. A most recent report shows a further reduction of working capital in companies in the US and Europe compared with the previous year, of between 3 per cent and 5 per cent. This demonstrates the continuing increase in the importance of working capital management to help companies achieve their strategic objectives. How to do It There is more to working capital management than simply telling a company to collect its debtors as quickly as possible, to delay paying its suppliers as long as possible, and to keep stock levels as low as possible. A properly conceived and executed improvement program will certainly focus on optimizing each of these components, but will deliver additional benefits that extend far beyond the merely operational. It will demonstrate the need for ambitious corporates to integrate working capital management into their strategic and tactical thinking, rather than view it as an optional bolt-on extra. There are a number of dos and don'ts to help guide corporate thinking. Firstly, do think of working capital management as a strategic objective that can enable your corporation's goals. We cannot over-emphasize this opening point. The same factors that drive a company's working capital also drive its operating costs and customer service performance. Therefore, by addressing the drivers of working capital a company will also experience significant improvement in operating costs and customer service.

For example, a company's working capital is deteriorating due to an increase in past due accounts receivable (AR). A review of the overdue AR illustrates a high level of customer disputes. The disputes are taking on average 30 days to resolve and consuming significant amounts of sales, order entry, and cash collectors' time. By tackling the root cause of the disputes, in this case poor adherence to pricing policies, the company can eliminate the disputes, thereby improving customer service.

This will free up the time of staff in sales, order entry and cash collections, enabling them to be more effective at their designated roles. This in turn increases productivity, reduces operating costs, and potentially increases sales. Working capital will improve, as customers will have fewer reasons to hold payment. This example illustrates how working capital is one of the best indicators of underlying inefficiency within an organization. Consider Another Perspective Don't think of things only from your own company's perspective. If you can help your own customers plan their inventory requirements more efficiently, for instance, you can match your production to their consumption, efficiently and cost-effectively, and do the same with your own suppliers. The potential implications for inventory levels are huge. By aligning ordering production and distribution processes, you increase inherent efficiency and achieve direct cost savings almost instantly, as a by-product. And then you discuss the best way to bill or to pay.

Do educate your organization to consider the trade-offs between different working capital assets when negotiating with customers and suppliers. Depending on the usage pattern of a raw material, there may be more to gain from negotiating consignment stock with a supplier versus pushing for extended terms. This could apply particularly in cases of long lead-time items, or those that require high minimum order quantities.

Agree Formal Terms Do agree formal terms with suppliers and customers and document those terms carefully. Keep them up to date, and communicate those payment terms to employees throughout your business, particularly those involved in the customer to cash and purchase to pay processes, including your sales organization.

Don't allow prolific new product introduction without a clear product range management strategy. Poor product range management creates inefficiency in the supply chain, as companies are required to support old products with inventory and manufacturing capability. This increases operating costs and exposes the company to an obsolete inventory that may have to be disposed of.

Collect your Cash Don't forget to collect your cash. Many businesses fail to implement effective ongoing collection procedures to prevent excess overdue funds or build-up of old debtors. Ask customers if invoices have been received and are clear to pay. If not, identify the problems that are preventing timely payment.

Confirm and reconfirm the credit terms agreed upon with the customer. Often, credit terms get lost in the translation of general payment terms and what's on the payables ledger in front of the payables clerk. Do devote the requisite amount of time and attention to the critical issue of dispute management.

Don't set top-down targets uniformly across the business. For instance, too many companies impose a 10 per cent reduction in working capital for each division. This fails to take into account the potential opportunity within a division and can result in setting an impossible target that acts to de-motivate. Instead, balance top-down with bottom-up intelligence when setting targets.

Targets Drive Behaviour Do set targets that drive the desired behaviour. Many companies will incentivise collections staff to minimize the aged AR over 60 days. Does this mean that customers who pay one to 60 days late are good payers? No, aged AR over 60 days will result in increased costs and time it takes to collect the debt. By incentivising staff to lower the amount over 60 days, you keep your costs down. Do educate staff, customers and suppliers that cash and cash management are important, and are an integral part of a successful business relationship.

Look Within Yourself Don't assume that all the answers are to be found externally. Before approaching existing customers and suppliers to discuss cash management goals, fully understand your own process gaps so you can credibly discuss poor payment processes.

Do treat suppliers as you would like your customers to treat you. Far greater cash flow benefits can be realized by strategically leveraging the relationship you have with suppliers and customers. In addition, a supplier is more likely to support you in an emergency if you have treated them fairly.

Don't however, treat everyone the same. Use segmentation tactics to split your customer supplier into similar groups. This may be based on a basket of criteria including profitability, sales, AR size, past due debt, average order size and frequency. Define strategies for each segment based around the criteria and your strategic goals. Do celebrate success in hitting targets. Emphasise the actions that helped you get there. Conclusion To summarise briefly, following the dos and don'ts will enable you to optimize cash and

to highlight inefficiencies in your processes that must be remedied to better serve customers. It will enable you to build stronger partnerships with your suppliers across the total working capital value chain. This translates ultimately into improvement in bottom-line results, often a good deal quicker than you might expect, and helps clarify the senior management focus on strategic imperatives. Author Bio REL Consultancy Group www.relconsult.com are global specialists in generating cash improvements, cost reductions and service enhancements by optimizing working capital. They are the only international corporate financial consulting firm that focuses exclusively on increasing operational efficiency from working capital and operations. They work with people to transform your organization, your customer's and your suppliers in more than 60 countries around the world. Article Source: http://www.ArticleGeek.com - Free Website Content