Introduction to Cash Management - Why and How

Introduction to Cash Management - Why and How

 Introduction to Cash Management – The Why and How

BREAKING: Standard Chartered Bank all set to offer Domestic Cash Management services in Europe following Tech Overhaul!

It’s Official! Standard Chartered Bank on 17th October 2019, announced that it will offer their clients with a large-scale range of cash management services from their London and Frankfurt centers to cover the whole of UK and European countries, following investment in the newly created cash management infrastructure.

This new cash management infrastructure is expected to be completed by the mid of 2020. The new additions apart from the already existing high- value clearing and the Transactional Forex (FX) services that the bank offers, it has decided to develop additional cash management services which include:

  1. Virtual Accounts
  2. Enhanced pooling and liquidity services
  3. API capabilities
  4. Low-value Clearing
  5. UK faster payments

Introduction

Mentioned above is the latest development in the European banks, for instance, Standard Chartered Bank in the United Kingdom, Europe, which is now leaning towards innovative ways of operating its cash management systems. But let us ask what Cash Management is. If this is a new concept for beginner bankers such as yourself, let us take you through this written guided tour comprising of the basics about cash management, and answering some important questions like: What is Cash Management? Why it is important? Who is it important to? And so on…

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What is Cash Management?

By definition, Cash management is an intricate yet simple process of collecting and managing cash flows. As we know in the simplest of the simple terms, money is important for everybody. So it becomes equally important to check and overlook the cash flow in the economy of any country, region or some cases, the entire global economy.

And thus, to answer the question of whom is it important to, cash management can be equally crucial to both, Individuals and companies alike since cash is a primary asset both individuals and companies use to pay their obligations daily. Moreover, for Individuals, cash is a vital component for their financial stability as it is also usually considered a part of the total wealth portfolio. In the business arena, cash management is a key component of a company’s financial stability. So in a gist, if the cash management is poor, the companies are set to dissolve due to financial instability.

Understanding the Concept

The concept of cash management is far more important and carries deeper significance than just merely collecting and managing the cash flows of a country or a region. For instance, let us take an important example of cash management in Business, and understand how and why this is important:

In businesses, Most of the private companies or financial institutions that come under the tag of NBFCs – have a lot of cash inflows and outflows that need to be wisely managed to meet the day-to-day obligations of these companies. Cash management thus also helps in setting up plans for future payments in advance and maintain adequate business stability.

Who is responsible for Cash Management Strategies?

Well, as cash management is more of a finance and accounting concept, so the shift goes to corporate business, which even includes corporate banks and financial services companies. So incorporate cash management, the business managers, or in some cases – the corporate treasurers and Chief Financial Officers (CFOs) are usually are the ones who are responsible for overall cash management strategies. It usually involves a lot of accounting, but which financial strategy doesn’t?

Apart from this, there are many cash management services and solutions available in the financial marketplaces, either by private corporations or Corporate Banks, available to Individuals and Companies.

The most important component of corporate Cash management is the Cash flow statement apart from the other key metrics that are monitored and analyzed by cash management executives on a daily, monthly, quarterly and annual basis. The cash flow statement is an important tool that inclusively deals with all of a business’s cash flows.

What Does Cash Management Include?

Incorporate banking and businesses, cash management commonly involves assessing market liquidity, cash flow, and investments 

When it comes to banks, there are a variety of permutations and combinations that go well with the practical aspect of cash management. As mentioned in the staring of the blog, Standard Chartered has improved its cash management systems by introducing various tools such as low- value clearings, virtual accounts, API and so on.

All these services related to the cash flow can be used to describe all the bank accounts. But it is also important to know that these services related to cash flows are only offered to large business customers.

Cash management is more often used to describe specific banking services such as:

Moreover, Cash management differs in meaning and use in different fields of application. For example, cash management describes financial instruments in the financial market as money market funds, treasury bills and certificates of Deposit.

 

Conclusion

While there is a growing awareness of the cash management systems, incorporate banks or private business, one needs to be vigilant in terms that if you are a large business customer, you should stay updated with the regular processes involved with the cash management of your bank.

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