Learn what your company's treasury is and how to manage it.
We detail the main tasks you must perform to control your treasury.
A company can sell a lot and have a high profit margin. But this does not necessarily mean that it has to have liquidity to meet its payments. This happens because the flow of income and expenses does not match the flow of money in and out of the company.
Cash management is the daily workhorse of many companies. Ensuring the necessary liquidity at all times and obtaining profitability from cash surpluses is not an easy task.
Start of marked textTWEET IT! It's important dominican republic email list to keep your company's cash management under control. Learn how to do it correctly.End of marked text
A company's cash management involves optimizing liquidity . The goal is to ensure that the funds necessary to make the payments committed by the company are available in the appropriate currency and at the right time.
Company treasurers must make the necessary arrangements with financial institutions to obtain financing for the company's operations when necessary.
One of the points that treasury managers must take into account is the value date of transactions . Otherwise, they may incur costly overdrafts due to differences between the accounting date and the value date.
2) Clients who pay late and suppliers who demand cash payments
One of the premises of efficient treasury management is to have exhaustive control of collections and payments , collecting as soon as possible and trying to obtain financing from suppliers. But this is not an easy task, for the following reasons:
Certain clients , especially if they are important, may delay payment deadlines, although this should always be within the maximum legal period of 60 days . To minimise the effect of delays in payments, the company can resort to factoring and advance the collection of its invoices . Here, the problem would lie in the event of returns of the credit advances remitted by the company. This can be solved by carrying out non-recourse factoring , in which case the transferor company is free of liability in the event of non-payment by its client.
As far as suppliers are concerned , they may impose short payment terms or even demand payment in cash. This can be solved by negotiating with suppliers the financing of payments through confirming . Confirming allows longer payment terms to be negotiated. In the meantime, the supplier can collect payment at the time the confirming is accepted, but paying interest for advance payment.
It is important to keep track of collections and payments. Confirming is a good option for financing over longer payment periods.
3) 7 tasks necessary to optimize treasury management
Among the tasks of corporate treasury managers, we can highlight the following for their importance:
Collection control . Strict collection control must be carried out, monitoring outstanding commercial credits and promptly making claims to delinquent customers . Collections can also be anticipated through factoring . In large companies, collection control is carried out by the person responsible for accounts receivable .
Payment management . Obtaining financing from suppliers is usually the cheapest and most popular way to obtain financing. However, when the agreed term expires, it is vital to meet the payment commitments made to suppliers, since if non-payments occur, they can interrupt supplies or suspend credit, demanding payment in advance. To carry out good payment management, the figure of the accounts payable manager , which large companies usually have, is key.
Banking negotiations and providing information to financial institutions . If the company needs to finance its operations, the treasurer or financial director must negotiate the conditions with the credit institutions, as well as provide the information about the company that they require in order to carry out the corresponding risk analysis.
Ensure that the conditions agreed with financial institutions are met. It may happen that certain conditions are agreed for certain banking services and that after a certain period of time the standard conditions are applied. It may also happen that certain conditions are applied if a series of requirements are met, or that errors occur in bank settlements, etc.
Making cash flow forecasts and budgets . It is essential to know the company's future liquidity needs, which is why a cash flow budget must be made . This will help determine whether the company's daily activity is enough to cover all expenses and investments, or whether, on the contrary, it is necessary to finance certain investments or the company's working capital.
Management of exchange rate and interest rate hedges . Sudden changes in the exchange rates of the currencies used by the company or in interest rates , as is currently the case, can represent a significant loss for companies, which treasurers must keep under control.
