What is cash management

Cash management

The area of ​​responsibility of cash management includes all measures that serve the proper cash management of a company. Proper cash management requires planning cash management with the aim of optimizing a company's liquidity. The optimization of liquidity requires to secure the solvency of a company without restrictions, but to avoid unnecessary excess payments.
It is an attempt to achieve optimal financial control from the point of view of liquidity, risk and profitability.
1. Options for using a cash management system as an information system: Calling up the dispositive liquidity status, current overview of all account balances, sales information on individual accounts, preview of due dates for incoming and outgoing payments, calling up foreign exchange positions (foreign exchange) and determining interest risks and interest distribution.
2. Possible uses of a cash management system as a transaction system: Execution of transfers, processing of foreign exchange transactions, collection, optimization of multilateral, internal receivables through netting and minimization of sight balances by pooling all balances in a central account.

Projected financial surpluses must therefore be invested profitably, while financial deficits that are already recognizable today must either be prevented by dissolving liquidity reserves or financed by drawing on low-interest loans. In the case of international business activity, the area of ​​responsibility of cash management is expanded to include currency risk compensation operations. Up-to-date information on all payment movements and account balances of a company is a fundamental requirement for the necessary cash management operations, which is why companies use either cash management systems or computerized financial planning systems.

Collective term for the offers of the credit institutions for the processing of their electronic services, especially in payment transactions. This can include the exchange of data carriers in various forms, but also service programs that, for example, summarize and offset all bank transactions - even on different accounts - according to their value date. With cash management services, companies, freelancers, and in some cases also private individuals, can process their financial dispositions promptly, thus saving interest, efficiently and clearly.

Optimization of the control of all incoming and outgoing flows of the company taking into account defined liquidity, risk and profitability targets. A number of additional tasks are associated with this task, such as:
* in the case of excess cash: the optimization of short-term investments,
* in the event of a shortage of funds: financing with matching maturities,
* Foreign exchange management,
* Continuous provision of up-to-date information on the liquidity situation, liquidity forecast, developments in money, credit and foreign exchange positions, etc. as well as foreign exchange markets.

The processing takes place increasingly with the help of personal computers in on-line operation with the house bank via a central clearing account.
Obviously there is a trend in Germany that? as already practiced in the USA? With the help of the house bank, on the one hand, the accounts held at other banks around the world are included in the cash management. On the other hand, payment transaction processing processes can also take place across institutions. Cash management systems are used in Germany e.g. B. offered by Deutsche Bank (db-direct), Dresdner Bank (Drecam), Commerzbank (Com-Cash), Citibank (Citibanking), Bank of America (Bamtrac).

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