1、International Cash Management,anb,1,Introduction and First Steps,Agenda,The Role of Treasury Definition of Cash Management Benefits of Cash Management Liquidity Working Capital Float Receivables/Payables Management,anb,2,The Role of Treasury,Investment,anb,3,The Treasurer,Funding,Cash Management,Ban
2、k Relations,Foreign Exchange,Risk Management,Risk Management,Currency Risk- Transaction- Translation- Economic Interest Rate Risk Other Risks- Counter-party Risk- Settlement Risk- Systemic Risk,anb,4,Corporate Definition of Cash Management,The effective planning, monitoring and management of liquid
3、/ near liquid resources including: Day-to-day cash control Money at the bank Receipts Payments Short Term investments and borrowings FX,anb,5,Bank Definition of Cash Management,The effective planning, monitoring and management of liquid / near liquid resources including: Provision of bank accounts D
4、eposit / withdrawal facilities Provision of information regarding bank accounts and positions Money transfers and collection services Investment facilities Financing facilities Pooling and netting,anb,6,Benefits of Good Cash Management,Control of financial risk Opportunity for profit Strengthened ba
5、lance sheet Increased customer, supplier, and shareholder confidence,anb,7,Nature of Cash Flows,Different industries have different cash flow characteristics Timing and mismatches Fluctuations Predictability Currency Location,anb,8,Definition of Liquidity,Having sufficient funds available to meet al
6、l foreseen and unforeseen obligationsLiquidity has costs- Cash is unproductive- Spread between borrowing and deposit rates and between long and short term rates,anb,9,We Need Liquidity for,Day to day transactions Precautionary balances Compensating balances Obtaining discounts Acid tests Favourable
7、opportunities Overall, avoiding bankruptcy!,anb,10,Sources of Liquidity (Some),Bonds Bank Loans short, long Debtors/Receivables Stock/Inventory Cash Short term investments Treasury bills etc etc But which are most liquid?,anb,11,The Cash Cycle,Profit?Cash Balance?,anb,12,Stock,Stock,20,20,40,purchas
8、es,Sale 80,labour,Operating Cycle,Purchase Resources Pay Sell on Credit Receive CashInventory Conversion Receivables ConversionPayables Period Cash Conversion CycleOperating CycleFrom:Fundamentals of Contemporary Financial Management, 2nd ed , by Moyer, McGuigan and Rao,anb,13,Operating Cycles,Inven
9、tory Conversion/Days InventoryInventory x 365Cost of Goods Sold Payables Conversion/Days PayablePayables x 365Cost of Goods Sold Receivables Conversion/Days ReceivableReceivables x 365Turnover,anb,14,Balance Sheet Short Term Items,2013 2012 Current assets Inventories 1,910 1,903 Trade and other rece
10、ivables 1,713 1,625 Current tax assets 13 - Other financial assets 43 78 Cash and short term assets 733 9174,412 4,523Current liabilities Short term borrowings 355 555 Trade and other payables 1,690 1,735 Current tax liabilities 121 44 Other financial liabilities 119 13 Short term provisions 82 1301
11、,367 2,477 Turnover 9,577 Cost of goods sold 8,943,anb,15,Cash Conversion,We need to consider control in all areas of working capital to maximise return, reduce cost. Some areas are not controlled by the Finance Function Stock/inventory Some areas have shared control payables and receivables Some ar
12、eas are controlled by the Finance Function short term borrowing and investment,anb,16,Float,Definition of bank floatThe time lost between a payor making a payment and a beneficiary receiving value* Cost of FloatPrincipal amount due x No. of days x cost of funds360 or 365This formula is important and
13、 should be used if issues of float arise,anb,17,Why Does Float Arise?,Deliberately Inefficiency Logistical situations Compensation mechanism,anb,18,Areas Where Float May Arise,Your Systems- Order to production- Production to delivery- Invoicing- Payment banked- Funds used Your customer systems- Invo
14、ice receipt to payment Bank systems- Payment made,anb,19,Ways to Control Float,Actions Change own systems Educate customers Include costs in prices Negotiate with bank Bank Services Lockbox Intervention accounts Remote disbursement Controlled disbursement Direct collections Efficient collections str
15、ucture,anb,20,Working Capital Management Receivables and Payables,Good receivables and payables management aids in: Cash flow forecasting Long-term funding and investment decisions Reduced risk of bad debts Stronger liquidity Stronger balance sheet ratios,anb,21,Impact of Poor Receivables Management
16、,Important because of costs arising from Float Bad debts Management time Legal fees Impact on analysts and creditors,anb,22,Speeding Receivables,Terms of trade,anb,23,Terms of Trade,Settlement Open account Clean collection Documentary collection Against payment Against acceptance Revocable documenta
17、ry letter of credit Irrevocable documentary letter of credit Unconfirmed Confirmed Advance payment,anb,24,Speeding Receivables,Terms of trade Clear instructions,anb,25,Clear Instructions,Such As Beneficiary name Bank code Account number (IBANs) e.g.GB 19 Loyd 3508 2500 7568 22 Transfer method Value
18、date,anb,26,Speeding Receivables,Terms of trade Clear instructions Method of payment,anb,27,anb,28,Payment and Clearing Systems What is important?,Float Value dating Availability Finality Cost Security,anb,29,Payment and Clearing Systems Value Dating,Value is the time when a payor ceases to be able
19、to use the funds in the sense of accruing interest or making a payment and is the time when a beneficiary is able to use the funds in the sense that they may be used to pay down an overdraft, accrue interest or be used to make a payment.,anb,30,Payment and Clearing Systems Value Dating,Forward Value
20、 Dating The time between a bank being notified of a transaction in favor of a customer and the customer receiving future value for the itemBack Value Dating The time between a bank being notified of a transaction to the customers account and the item being valued on a date prior to the date of the t
21、ransaction,Payment and Clearing Systems Availability,AvailabilityThe time when the beneficiary actually has access to the funds i.e. to use to make a payment,anb,31,anb,32,Payment and Clearing Systems Finality,The time after which a payment is considered to become irrevocable and cannot be returned
22、without the permission of the beneficiary account holder.,anb,33,Payment and Clearing Systems Cost,Different payment systems have different features as to Value, Float, Finality and security. Because of this they also have different costs The Cash Manager therefore has to be careful to use the most
23、cost effective method to get the job done,Speeding Receivables,Terms of trade Clear Instructions Method of payment Account structures Documentation Educate customer,anb,34,Speeding Receivables,Penalties Post dated cheques Legal process Internal process Stop supply Learn customer practices,anb,35,Spe
24、eding Receivables Stating the Obvious,Receivables management is a Team EffortNever forget the Relationship,anb,36,Payables Management,Obvious but critical questions: What is due? When is it due? Where should the payment be sent? How should the payment be sent? Are there funds to cover the payment? I
25、s the payment properly authorised?,anb,37,Payables Management,Improving Performance Timing credit period, float neutral Costs discounts, avoid penalties, forward value and forward plan, consolidate payments, use repetitives where possible, STP, BICs and IBANs,anb,38,Payables Management,Payables -The
26、 flip side of the coinSo Hang on to it Consider float versus control Account structures DiscountsAnd again, do not forget Relationship,anb,39,Operating Cycle,Purchase Resources Pay Sell on Credit Receive CashInventory Conversion 78 days Receivables Conversion65 daysPayables Period Cash Conversion Cycle69 days 74 daysOperating Cycle143From:Fundamentals of Contemporary Financial Management, 2nd ed, by Moyer, McGuigan and Rao,anb,40,
