Total visibility helps you foresee the availability of your cash. Managing cash flows, bank accounts and ensuring sufficient funds is important to meet financial obligations. Once your financial obligations are met you can either invest your money of payoff your debts.
Cash Availability: Having the right amount of cash, in the right place, on time, and in the correct currency will help reduce the risks of increasing debt. Increased debt, leads to a rise in interest expenses, which in turn, leads to an increase in the need for cash flow to cover these expenses. Debtors will be hesitant to invest if you had a history of increased debt requirements.
Cash Visibility: Visibility to your cash can help you manage your cash inflows and outflows. This can be accomplished by aggregating your bank statements, monitoring the cost of processing the accounts receivables and accounts payable (including both internal and external costs).
Minimize the Idle cash: According to Investopedia, “idle cash is often regarded as wasted funds due to the lack of appreciation. Idle cash can actually decrease in value in terms of purchasing power because it does not keep up with inflation. While it is frequently desirable to keep some funds for use in paying regular bills. Placing money in a market fund or other short-term investment vehicle can provide the desired availability to the funds while still increasing in value.” Some of the investment methods are: –
- Bonds are generally categorized under fixed income securities.
- Compared to bonds, stocks provide relatively high potential returns.
Practicing account reconciliation at definite time intervals can help you understand the nature of cash movement in and out of the organization. Reconciliation is comparing the actual results with what was expected. The process of account reconciliation involves: –
- You download your bank statements.
- Compare the actuals with what was expected.
- If the balances match, then the item is marked reconciled, otherwise it is investigated and adjustments are made accordingly.
The strategy is to get a true cash position. When you implement an automated system which does all the work, you have an accurate cash position every morning even before you have your first cup of coffee. This allows you to maximize the returns on your idle cash.
We believe that Treasury Automation should be simple and straightforward. You deserve the latest technology without breaking the bank; a system that scales to your needs; keeps you productive on the move; creates and returns value to your shareholders. With Cash Management as one of the crucial modules, Treasurytree is a system that works for you and not the other way around.
January 17, 2017
