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Home and Away: Making Your Cash Work Making your cash work, both in-country and cross-border, requires a delicate balancing act. This roundtable discussion details some of the conclusions reached by participants at the Cash Management University as to how best to make your cash work.

Home and Away: Making Your Cash Work

Minimising borrowing, particularly for short-term liquidity management, is a priority for most treasurers.

During the final roundtable discussion at the Cash Management University, speakers discussed some of the conclusions of the various workshops that had taken place during the event.Participating in the roundtable were: Mario Bruni, Managing Director UK Branch, Fiat Finance & Trade Ltd; Raffi Basmadjian, Group Treasurer, France Telecom-Orange; Pierre Fersztand, Global Head of Cash Management, BNP Paribas, and Gerd Klevenz, Head of Treasury Operations & Processes, Global Treasury, SAP;chaired by Helen Sanders, Editorial Director, TMI. 

The conversation centred around four related questions, which together addressed a wide variety of the topics of discussion during the workshops, all under the theme of how best to make cash work, both in-country and cross-border (figure 1).

How much cash do you have?

Treasurers are faced daily with the issue of identifying where their cash is, and whether it is safe. Indeed, as Damien McMahon, Partner – Finance & Treasury Solutions Group, PwC illustrated in his presentation based on the PwC Global Treasury Survey 2010, cash management is second only to financing in treasurers’ list of priorities. To ensure appropriate visibility and security of cash, treasurers need to work with the right banks, manage relationships effectively, and have appropriate cash management structures in place. According to the PwC Global Treasury Survey 2010, 78% of respondents now rank bank relationship management as a high priority compared with 56% before the crisis. In particular, banks and corporates alike recognise the links between different activities such as funding and liquidity, and how these issues need to be considered within the context of a wider relationship. Banks should be in a position to provide liquidity, but treasurers also need their banks to have a comprehensive product offering, breadth and depth of network, leading technology and a commitment to excellence.

How much cash do you need?

While many treasurers and cash managers have achieved considerable success in achieving visibility and control over cash, the issue of how much cash a company needs is more problematic. Holding too large a cash ‘cushion’ can be detrimental to business investment and limit returns, while too little cash can result in higher borrowings and an inability to respond quickly to a changing market and business environment. To address this effectively requires a commitment to accurate and timely cash flow forecasting across the business. In the PwC Global Treasury Survey, 2010, cash flow forecasting was identified most frequently as a priority by treasurers and cash managers (around 67%) but as many practitioners will recognise, this has been the case for a number of years. During the workshop dedicated to cash flow forecasting, Alessandro Nesti, Financial Activities Director, Menarini Group described the cash management project on which his company had embarked. This involved centralising cash and treasury management activities into group treasury, implementing standardised technology and above all, propagating a culture in which ‘cash is king’, with management incentives aligned with cash objectives. By doing so, cash flow forecasting has become a higher priority and greater consistency and accuracy of business unit forecasting and central reporting has been achieved.

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