Cash is the lifeblood of all businesses. Without liquidity, businesses wither and die. The mission of the treasury department is to manage the liquidity of a business. This means all current/projected cash inflows/outflows must be monitored to ensure there is sufficient cash to fund company operations, as well as to ensure excess cash is properly invested. To do this, the function must ensure that existing assets are safeguarded through the use of safe and reliable forms of investment and hedging activities.

Treasurers list their most important tasks as:

• Enhance liquidity risk
• Optimize working capital (WC)
• Improve cash flow (CF) forecasting and visibility of cash
• Improve cash conversion cycle (CCC)
• Optimize inventory levels

Activities related to Cash include:

• Cash forecasting. Compile information to create an ongoing cash forecast. Information may come from the accounting records, the budget, capital budget, board minutes (dividend payments) and for expenditures related to acquisitions and divestitures.
• Working Capital monitoring. Review corporate policies related to WC and model their impact on cash flows.
• Cash Concentration. Create a system for funneling cash into a centralized investment account to facilitate the effective investment of cash.

Activities related to investing are broad and include:

• Investments. The corporate investment policy is used for allocating excess cash to various investments, depending on their ROR and how quickly they can be converted into cash.
• Grant credit. Issue credit to customers, which involves management of the policy under which credit terms are granted.
• Compliance. Ensuring the organization is in compliance with various laws and regulations.
• Fund raising. Determine when additional cash is needed, and raise funds through the acquisition of debt, sale of stock, or changes in company policies that impact the amount of working capital required to run the business.
• Risk management. Use various hedging and netting strategies to reduce risk related to changes in asset values, interest rates, and foreign currency holdings.
• Credit rating agency relations. Communication with rating agencies of the company's financial results and condition.
• Bank relations. Keep the company's bankers apprised of the company's financial condition/projections, and potential changes in need for borrowed funds.

This segment focuses on each of these roles and the sub-components involved.

Note: This course is also a part of The Controllership Series.