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With banks restricted in their lending it has never been more important to maximise the available cash within your own company.
  
And bank credit is likely to become even more expensive, thanks to Basel III, and subject to more conditions. Unlocking the cash in your own supply chain through good Cash Management Practice is no longer a luxury but an imperative. Equally, since the same liquidity issues will be facing all market participants, it is vital to understand the risks in the payment chain and how to avoid or mitigate them.

Good Cash Management Practice means controlling payments, minimising the delay between releasing money from your own account and getting it to the beneficiary, because in the meantime your company enjoys the benefits of the cash. It means speeding collections, cutting down the delays in receiving a payment, processing it, having the cash available and using it. Using electronic banking tools is vital to good Cash Management Practice, but it is also important to be aware of the shortcomings of available approaches, especially when it comes to international cash management and using SWIFT-based reporting.

The balances resulting from paying and collecting money will come to rest in a series of bank accounts, possibly in multiple currencies and possibly also domiciled in multiple countries and multiple banks. It is best to be aware of the charges that can accrue on those balances, as well as when credit or debit interest is applied. Furthermore, an international company will no doubt consist of several legal entities, and there are both opportunities and pitfalls associated with consolidating the balances for the purposes of interest: opportunities such as zero-balancing and pitfalls such as breaching Thin Capitalisation rules and incurring Withholding Tax deductions.

Then, if consolidating the balances results in a net surplus or a net deficit, a company will want to look at how to invest that or how to fund it – not so easy in times of zero or negative interest rates on the one side, and risk-averse but yield-hungry lenders on the other. All that adds up to a very challenging task for those involved in managing assets and liabilities to a very near-term horizon: the horizon within which most liabilities fall due and have to be paid, and woe betide the company that has to fall back on expensive lines of credit – or indeed on no credit at all – instead of having cash-in-hand. Good Cash Management Practice can then become a matter of simple survival.
 

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