Cash Flow Management

The basic objective of cash flow management is to understand and minimize the cost of processing and managing cash flows both externally with other companies and organizations and internally within the company or group.

Cash Flow Management

Source: J&W Associates Copyright© 2011

Significant cost savings and improvements in efficiency can be achieved in Cash Flow Management through the use of cash flow forecasting, in-house banking, netting and payment factories.

Forecasting of Cash Flows is one of the most complex and difficult tasks in cash and treasury management. It requires commitment of the whole company to achieve cost-effective and accurate forecasts in the four types of cash flow.

In-house Banking is an internal treasury function, typically used by large multi-national corporations, where the treasury department provides foreign exchange, intra-group lending and cash flow management services for the group.

Multi-lateral Netting systems and services minimize the number of payments and the cost of FX between subsidiaries and companies within a group. Also for some external payments by making one payment, at the end of a given period, for the net cash flow between either intra-group or with trading partners.

Payment Factories minimize the cost of external payment flows as well as the internal cost of processing payments by centralizing all payments in a dedicated processing centre. Payment factories can also be used to optimize liquidity by managing the timing of payments. Some well established payment factories also provide payment collection services.

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