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.
Learning Objectives
- Discover and outline typical Treasury activities.
- Explore cash forecasting.
- Examine how to prepare a cash forecast.
- Examine WC and monitoring.
- Understand cash concentration.
- Explore investments and banking.
Included In Certifications
This course is included in the following Certification Programs:
18 CoursesThe Controllership Series Certification
- The Controllership Series: The Controller Function - Elevating the Role
- The Controllership Series: The Controller Function - Strategic and Annual Planning
- GAAP Principles, Assumptions and Considerations
- The Treasury Function Part 1: Cash, Liquidity and Investments
- The Controllership Series: The Controller Function - Cash and Investments
- ASC 842 Accounting for Leases - Deep Dive
- Revenue Recognition (ASC Topic 606) Standard Overview
- The Controllership Series: The Controller Function - Inventory Part 1
- The Controllership Series: The Controller Function - Inventory Part 2 - Inventory Valuation, Physical Inventory Methods and Inventory fraud
- The Controllership Series: Overhead, Direct and Indirect Costs and Allocation Methods
- The Controllership Series: Financial Statement Preparation and Presentation
- Analyzing Financial Ratios - Leverage
- Analyzing Financial Ratios - Performance And Efficiency
- The Controllership Series: The Controllers Role in Data Analytics and Big Data
- The Controllership Series: The Financial Close Process
- The Controllership Series: Managerial Accounting Basics and Cost Principles
- The Controllership Series: Sales, Collections and Customer Credit
- Tools for The Controllership Series Certificate
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Prerequisites
No advanced preparation or prerequisites are required for this course.
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