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What is Cash Management?

Cash management is a core service provided by banks to their entire corporate and financial institution client base. The client base starts at the sole trader level, progresses through SME and MME clients, all the way to the largest and most complex of global corporates/financial institutions. All clients of a bank have a need for some part of the bank’s product and service suite in the field of cash management.

The field of cash management has become even more important for banks since the financial crisis of 2008. The reason for this is that as well as generating sizable fee income for a bank, this product suite also generates the cheapest and most stable form of liquidity a bank can find. This source of liquidity, which is required so a bank can offer any of its debt services, is in short supply, so having a strong suite of cash management products combined with a sales force that is able to articulate their bank’s proposition to a client base is imperative these days.

Importance of Cash Management

It is vital a bank’s sales force team is able to converse professionally with their client base about cash management. This ensures that the bank’s team understands what is driving their client’s thinking in this field, which stems from a corporate treasurers’ number one priority being to ensure that their company is always able to meet its obligations in full, wherever, whenever and in whichever currency they fall due, on the due date. This leads to how a client’s treasury team review this area of banking, with ‘risk management’ being their main objective, followed by scalable, transparent solutions that provide the client with visibility of what is happening.

Further principles ensure a banker can discuss with a company that operates a retail business in one town, to an organisation that handles occasional high-value payments prior to letting goods leave a factory, to a multi-national corporate operating in various geographies and currencies, to a sophisticated financial institution that is doing thousands of high-value settlement trades that need reconciling prior to releasing the other side of a trade.

What Makes a Strong Cash Management System?

The foundations of any good cash management proposition, from both the banks and the clients perspective, are summarized into the bank account and the transaction processing parts of cash management, reviewing how these principles are done on a single currency, single financial center basis all the way through to multiple across currencies across many geographies basis.

Another component of cash management reviews how a bank can maximize its worth to its clients by offering liquidity solutions, both on a domestic and global basis, as well as whether the client is net long or short of funds. This also looks at how technology is used to automate these functions at the treasury on the client site, as well as how banks use technology to minimize their costs.

More Services Offered

Other services which sit alongside cash management include; transactional foreign exchange, trade and working capital, security services and asset management. These must also be used as part of a solution suite to meet the needs of a bank’s client base.

The integration on FX, trade etc., into the cash management solutions is what makes a client’s treasury team feel as though their needs have been met and also ensures a bank continues to benefit from a stable, lengthy and healthy relationship with its client base.