Peter Drucker, THE management guru, passionately believed that the first duty of management is to develop a cogent answer to the deceptively difficult question, “What business are we in?” It is only after you have defined what business you are in, can you decide what your goal is.
In Euromoney in 2010 I wrote that the challenge for cash management bankers was how to morph their international cash management services into Total Working Capital Management because that was what I thought corporate treasurers do, see figure.
Total Working Capital Management
Source & Copyright©2010 - J&W Associates
New business definition
But now, in 2014, I have changed my mind because the business has moved on and the remit broadened. Technology and world trade have redefined the cash and treasury management. Today, transaction bankers, cash management service suppliers, and corporate treasurers are in the:
cash flow management business.
Cash and treasury management is all about managing and optimising the cash/the fund flows: sweeping and pooling is all about flows, as is trade and trade finance; investing could be said to be just where value is stored for a time; and payment/collections are definitely about flows. This definition of the business gives focus to corporate treasury departments and those that provide systems and services for them.
Corporate treasurers goal
Generally, the corporate treasurer’s main goal is to:
optimise the overall cash flow efficiency of the business,
i.e. to optimise the internal and external flows of their supply/value chains.
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