Corporate cash management: a treasury operating checklist

Corporate cash management is the treasury discipline of overseeing cash collected, cash paid and balances held across accounts so a company can meet obligations when due. Brex describes the work as collecting, monitoring and controlling cash flow, while Barclays frames it as managing daily cash movements to maintain visibility, control and liquidity.

The central exposure is timing. Brex illustrates the issue with customer receipts on 60-day terms and supplier payments due in 30 days. A practical response is to establish a reliable cash position, forecast expected flows, identify required liquidity and consider the use of surplus balances only within the company’s liquidity goals and risk guidelines.

Use corporate cash management in this order

1. Map accounts and cash flows. Build a current view of bank balances, expected collections, approved payments and other known movements. Barclays identifies multiple accounts, markets and payment cycles as sources of complexity for corporate treasury teams.
2. Reconcile cash information. Reconciliation supports a clearer view of incoming and outgoing flows. Barclays says virtual accounts can simplify reconciliation and improve oversight of those flows; suitability depends on a company’s banking arrangements and requirements.
3. Build a forward cash forecast. Project when identified receipts and payments are expected to affect each account and the consolidated position. Brex distinguishes this forward-looking activity from bookkeeping, which records completed transactions. In a 2024 Barclays discussion, an assistant treasurer advised examining the assumptions and drivers behind reported numbers rather than relying on output without review.
4. Separate cash by when it is needed. Identify intraday and immediate operating requirements, short-term liquidity needs and balances that may be available over a longer period. Barclays describes collections, payments and liquidity management across operational, intraday and longer-term horizons.
5. Address projected gaps early. Where a forecast shows that payments will precede receipts, assess collection and payment timing, available cash and, where relevant, funding arrangements before obligations fall due.
6. Assess surplus cash after liquidity needs are covered. The date funds may be needed, principal-preservation priorities and risk guidelines should inform the decision. Morgan Stanley lists deposit accounts, money market funds and high-credit-quality fixed income among possible corporate cash vehicles, while disclosures on those instruments show that access and risk can differ.
7. Review the position and forecast. Reduce avoidable manual intervention in reporting inputs where possible, while retaining human analysis of the resulting information, as practitioners quoted by Barclays advised.

Set the cash horizon before choosing a tool

• Intraday and operating cash: funds needed to settle payments and support essential activity. Barclays identifies operational and intraday obligations as distinct cash-management horizons.
• Short-term liquidity: cash expected to be needed over the near term. Liquidity objectives and risk guidelines should determine how these balances are handled.
• Longer-term surplus: balances not required for the earlier horizons under the forecast. Morgan Stanley says portfolio maturity structure, credit quality and cash flow can be managed in line with liquidity goals and risk guidelines.

As a working rule, an account balance is not surplus merely because it is unused today. Expected payroll, supplier payments, debt service and other known obligations may already require it.

An illustrative timing test

Assume a company begins a month with $500,000. It expects $300,000 of customer receipts late in the month, but has $450,000 of payments due earlier. Before the late receipts arrive, its projected balance is $50,000: $500,000 minus $450,000. After the expected receipts, the month-end projection becomes $350,000.

The $350,000 month-end figure alone does not establish investable surplus. The treasury team would first check the next forecast period, intraday commitments and uncertainty around the $300,000 receipt. If the next week includes $250,000 of payroll and supplier payments, only the residual after those needs and the applicable liquidity buffer could be evaluated as longer-term surplus. This is an illustrative sequencing example, not a funding or investment recommendation.

Controls for the cash-management process

• Test forecast inputs: examine the drivers and assumptions behind reported numbers, including changes in the timing or amount of expected flows.
• Review funding requirements: Barclays’ 2024 practitioner discussion identified upcoming refinancing needs and whether borrowing is fixed or floating as relevant considerations for treasury planning.
• Assess investment risk: Morgan Stanley discloses that fixed-income investing entails credit and interest-rate risk, and that bond prices generally fall when interest rates rise. Its disclosures also state that money market funds are not government-insured or guaranteed and can lose money; diversification does not guarantee a profit or prevent loss.
• Match access terms to the forecast: Investec lists instant-access accounts, notice accounts and fixed-term deposits for businesses. Its notice-account examples have access periods of 32, 65, 95 or 180 days, demonstrating the importance of matching access terms to expected cash needs.
• Identify contingent calls on cash: where relevant, review supply-chain weak points and potential needs for credit support, guarantees or collateral, an approach discussed by Barclays’ 2024 contributors.

Frequently asked questions

How does a cash forecast differ from bookkeeping?

A cash forecast projects expected future receipts, payments and resulting cash positions. Brex distinguishes this from bookkeeping, which records completed transactions. Forecasts also require review of the assumptions and drivers behind the numbers.

How can virtual accounts improve cash visibility and reconciliation?

Barclays says virtual accounts can simplify reconciliation and improve oversight of incoming and outgoing flows. Whether they are suitable depends on the company’s banking arrangements and requirements.

What risks should a company assess before investing surplus cash?

A company should first establish when the cash may be required and apply its liquidity goals and risk guidelines. Morgan Stanley discloses credit and interest-rate risk for fixed income, and says money market funds can lose money. Access terms also vary: Investec lists instant-access, notice and fixed-term business accounts.

Sources

• The complete guide to corporate cash management — www.brex.com
• Corporate Cash Management Solutions — www.morganstanley.com
• Cash Management Solutions — www.ib.barclays
• How can treasurers manage cash in 2024? — www.barclayscorporate.com
• Cash management for business — www.investec.com