Managing global cash is no small feat. And it’s no secret that a strong treasury function is imperative to an effective global cash management strategy, especially in today’s rising rate environment. Organizations with a responsive and flexible treasury function are better positioned to mitigate financial risk, centralize payments, increase efficiencies and take advantages of opportunity when it arises.
Your organization can reap the benefits of a solid treasury position by adopting these 4 strategies for managing your global cash:
1. Gain Control Over Operations
Process inefficiency remains a stumbling block to operational excellence for many organizations. A variety of factors contribute, including:
- Multiple banks,
- Multiple systems,
- Manual intervention, and
- Paper-based activities.
While 75 percent of treasurers in a survey by AITE Group cite improving cash flow forecasting as a priority, that won’t happen until processes are streamlined and automated. All too often, treasury staff is forced to waste time aggregating and consolidating data from a variety of terminals, banks and accounts. Much of this information still lives in spreadsheets. In fact, 80 percent of executives surveyed employ Excel spreadsheets as a forecasting tool.
The manual processes involved in this data aggregation and reconciliation inevitably lead to errors and mistakes, outdated information, wasted time and inefficiencies. By the time all this work is accomplished, there is little time or energy remaining for the actual task of forecasting. With process improvement and automation, treasury staff is free to focus on the analysis and forecasting that is their forte — and most useful for the overall organization.
2. Understand Your Focus
Forecasting is critical to a successful treasury function. Not just any kind of forecasting — accurate forecasting over a variety of time periods that includes the entire enterprise-wide global cash position. Unfortunately, in fragmented systems, such clarity isn’t easy to obtain.
According to Aberdeen, nearly half of treasury executives identified improving cash flow forecasting as characteristic of best-in-class strategies to align treasury and risk.
A complete, non-siloed overview of all of an organization’s cash accounts and payments — regardless of bank, currency or geography — provides real-time forecasts that give executives the information they need to respond proactively, rather than reactively, to situations as they occur.
3. Create Visibility
Visibility is an absolute necessity for any organization. Treasury’s visibility must include a wide spectrum of assets and exposures, including:
- Global bank accounts
- Counterparty exposure by category and individually
- Foreign currencies and commodities
Real-time visibility provides the most flexibility. The ability to match the location of cash with cash needs, for example, ensures that cash will be available in the currency and the amount where needed. Unfortunately, a lack of visibility afflicts far too many organizations. According to a report by Strategic Treasurer, only about 7 out of 10 firms have either real-time or daily visibility into their bank accounts – which means that 3 out of 10 firms are blind to the opportunities and challenges that surround them.
Organizations that make global visibility a priority gain the ability to significantly improve cash flow forecasting and risk modeling. In addition, robust global cash visibility helps organizations avoid potentially expensive borrowing and late payment fees, while positioning the overall organization to take advantage of opportunities for investment.
4. Maximize Liquidity
In a crisis, liquidity rules. Treasurers can’t wait until an unexpected event strikes to understand their organization’s current liquidity position or simply hope that sufficient liquidity will be available. Because risks have the potential to multiply in unexpected ways, it’s essential to have a 360-degree view of your global cash position and optimize liquidity as much as possible.
Cash and liquidity management have taken on a higher profile recently, with 69 percent of treasurers saying that the increased importance of cash and liquidity is a key reason for treasury’s greater strategic role. Organizations with abundant liquidity and the flexibility to deploy it are better positioned to capitalize on opportunities when they arise, thereby creating a powerful advantage over less nimble competitors.
There is no time to waste when it comes to improving your organization’s ability to manage global cash. Stay ahead of the curve by making sure your organization is armed with the necessary tools to optimize your cash management function so you can proactively respond to risks and take advantage of opportunities.