Cash & Liquidity Management
Published  15 MIN READ
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Have You Caught the Cash Management Bug?

by Helen Sanders, Editor

One of my favourite ‘snippets’ in the Sunday newspapers is the list of fashions ‘going up’ and those ‘going down’. Sadly, I’ve never heard of most of the designers, celebrities and gadgets that are featured on either list, but it makes me feel like I have a finger on some sort of pulse. In a briefly idle moment, I wondered what these lists would look like in the treasury sphere. ‘Going up’, we have working capital optimisation, cash flow forecasting (although this has always been there) and mobile solutions for payments and collections. ‘Going down’ we have decentralised cash management, long alcohol-soaked lunches with banks (never experienced by younger treasury professionals), and spreadsheets (we hope).

Cash management has been steadily climbing the list of priorities in recent years for banks and corporate treasurers alike. No longer is transaction services, of which cash management is a major element, the drab sister to its more glamorous corporate finance or investment siblings. For banks, cash management represents a reliable revenue stream that is less impacted by market volatility than other areas of activity and a vital opportunity to secure long term relationships with corporate customers. For corporates, efficient, reliable cash management is essential to the running of the business, and key drivers of working capital. It is also valuable ancillary business to build secure relationships with financing banks.

A competitive offering

It would be quite wrong, however, to think that cash management is simply an ‘add on’ to a financing relationship; in fact, the need for banks to be highly competitive in their cash management offerings has never been greater:

  • A multinational corporation will typically have more than one financing bank so companies have a choice of cash management partners.
  • A company will need access to cash management services in every country in which it has business activities. For reasons of coverage or regulatory requirements, one or even all of a company’s financing banks may be unable to support the full range of cash management services it requires.
  • There is other ancillary business in addition to cash management that a company can offer to its banks in support of a financing relationship, such as FX and trade finance.
  • It is becoming easier to switch or add cash management banks, not least due to the growth of SWIFT corporate access and more consistent XML-based formats.

Another view I have heard from some treasurers (although typically of smaller companies) is that cash management has become so commoditised that the choice of cash management bank is largely irrelevant. If technology, regulations, and cash management requirements never changed, and if cash management in every country was identical, then this view may be valid. The reality is, obviously, quite different. This article considers some of the cash management trends amongst multinational corporations, both globally and regionally.