Cash management or liquidity management designates a term in the finance management in the management economics.

Article and goals cash management

• The term cash management designates all measures of the short term financial disposition in the enterprise. It covers thereby all tasks and measures, which are accomplished to the liquidity protection and for the reaching of highest efficiency in the exchange. Cash the management goes out thereby over a pure financial administration, an active, goal-oriented controlling of the liquidity is made there here with the goal of the Sicherstellung and maintenance of the solvency of the enterprise.
• Cash the management is usually in the range of the Treasury settled as subrange of the finance management. The execution cash of the management can be made either directly at the company upper company or by a company finance company abroad in or.
• A further objective is the achievement of a defined profitability of the assigned means. That means the maximization of the interest yield for surplus as well as the minimization of transaction costs. Besides it is to be paid attention necessarily to a minimization of the risks connected with the cash management. In the context of a risk management system guidelines should be specified for the use of credit institutes, financial instruments and markets.
• Derived from the task of core it belongs to the liquidity arrangement also to the tasks cash of the management to provide for an optimal binding from bank accounts to. An enterprise for example that in the euro-area with own bank accounts it maintains several addresses must guarantee for optimal liquidity that available liquidity is concentrated on these accounts on a central account and/or liquidity under covering on these accounts becomes balanced. The cash management avails itself thereby usually of the so-called Zerobalancing, a balancing of accounts procedure that banks offer.

The arrangement cash management

Related to international cash the management four central of fields of application cash management are differentiated:

During the all receipts of payment become and - exits for a certain period seizes and balances, in order an overview of the liquidity situation, to receive i.e. possible surplus and/or deficits. For the exact statement of the momentary solvency due to the account balances and data from the financial accounting a daily is provided. Besides a future-oriented takes place via the list of financial plans, which exhibit a short until medium-term long-range planning period. The further the plans are enough thereby into the future, the lower usually is their planning accuracy. The information won by planning forms then the basis for all decisions and procedures within the range cash management.

Arrangement of liquid means

The central task cash management is the arrangement of the liquid means. It covers measures for the covering of liquidity deficits and to the plant of excess liquidities. Cash the management must react both to according to plan foreseeable, and to not prognosticatable liquidity fluctuations appropriately. Liquidity deficits must become balanced regarding the Sicherstellung of the Zahlungsbereitschaft by short term financing by borrowing. Obtained excess liquidities are to be put on however yielding interest. The decisions over appropriate procurement of capital and/or plant forms has to take place thereby on basis of the given strategic framework in the range of the financing.

Organization of the payment stream

As economical a transfer as possible is aimed at by payments. A goal is it, the costs of the movements of capital, as bspw. To reduce bank charges or costs of the internal treatment. In the context cash management a frequently used instrument for the reduction of these costs is the Netting. By Netting - and/or the company clearing synonymously used in the literature - one understands the set-off of company internal demands and commitments to a certain deadline. These can result e.g. from a one-sided or mutual supply and achievement traffic. According to the number of included associated companies can be differentiated further between bilateral and multilateral Netting. In multinational companies usually the multilateral Netting application finds, since usually supply and achievement entwinements between several associated companies exist. The company internal demands and commitments are central seized and combined after conversion into a reference currency into an accounting matrix. From it the net demands result and - commitments of the associated companies, which become balanced by transfers at fixed dates.

Foreign exchange risk management

With transnational activities by companies different currency and marketing areas are to be considered. Above all the rate of exchange problem is here of importance, since changes of rate of exchange save a number of economic risks, like e.g. with the conversion of balance sheet items foreign societies. Task of the currency management in the context cash management is the delimitation of the rate of exchange risks by appropriate security measures, bspw. in the context of a foreign exchange Nettings.

Example

Situative liquidity analysis

• Daily in and disbursements supervise

Formation and dissolution of liquid reserves

• Excess liquidity - > reserves form
• - > reserves dissolve

Financing

• Principal ones mobilize
• Procurement of capital
• Internal financing
• External financing
• Self financing
• Outside financing

| internal financing 

| external financing 

|Eigenfinanzierung 

|Fremdfinanzierung 

Structural

• Long-term planning of investments
  • Tarpaulins of the subsequent costs
  • Tarpaulins of the financing
• Period structure

Liquidity politics in the case of crisis

• Which happens if"…. Scenarios
• Strategies prepare
  • Lower from expenditures
  • Shift from expenditures
  • Prefer from incomes (sales of fortunes)
• Catalog of measures provide

Pro and cons cash of the management

Advantages

• optimal utilization of liquid means
• Evasion of company-external backers
• Smaller central liquid reserve
• Reduction of bank-related costs
• Reconciliation of foreign exchange risks
• Size advantages with the financing
• Transparency and flexibility
• Uniform financial guidance
• Specialization

Disadvantages

• Costs of the central department
• Dependence on the central liquidity supply
• Danger of the risk misalignment
• Focus on short term realization of profits
• Administration expense
• Loss at
• Decision distance
• Transparency of financial conditions opposite third
• Dependence on the offerer cash management of system

Literature

• Hormuth, Mark of W.: "„Right and practice company-wide cash of the management: A contribution for company financing "“, Berlin 1998. ISBN 3428095758

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