Cash management organises the receipts, payments and liquidity required to operate a business. Its aim is to make funds available in the right place at the right time while controlling risks and costs. It relies on understanding balances, maintaining forecasts and establishing clear responsibilities.
1. Build a usable cash position
Each day starts with reliable information: what are the balances by account, bank, entity and currency? Distinguish ledger balances from available funds. Identify restricted cash, pending movements and instructions that have not yet been posted.
Set a reference time for consolidation and identify accounts with missing information. A partial position can be used when its scope and limitations are visible. Bank reconciliation then helps explain differences between expected transactions and recorded movements.
2. Turn forecasts into decisions
A cash forecast brings together expected receipts and disbursements. For each period: closing balance = opening balance + receipts − disbursements. Separate operating flows, investments, financing maturities and exceptional transactions so that funding needs can be understood.
For example, you could prepare a rolling thirteen-week forecast, updated weekly, with greater detail for the next few days. This horizon is a methodological choice to adapt to your business. Document assumptions, prepare a stress scenario and compare actual cash flows with forecasts to improve contributors’ inputs.
3. Address the operating cycle
Cash outcomes also depend on commercial and operational processes. Accurate, timely invoicing, resolution of disputes and monitoring of receivables help make receipts more predictable. Sales, accounting and collections teams should share the same information about due dates and disagreements.
For suppliers, schedule payments in line with agreed terms and operational continuity needs. Also review inventory and purchasing with operational managers. The aim is to understand the liquidity tied up in the operating cycle and identify actions consistent with customer and supplier relationships.
4. Structure banking relationships and liquidity
Maintain an inventory of accounts, services, authorised signatories and available financing. Compare billed fees with negotiated terms and actual usage: account maintenance, transactions, connections and financing. Documented dialogue with banks helps explain cash requirements and the forecasts supporting them.
Within a group, assess cash pooling when appropriate for the organisation. Its scope depends on contracts, entities and the applicable local framework. For surplus cash, define a policy that combines availability, security, counterparty limits and return objectives in line with forecast needs.
5. Secure everyday operations
Formalise roles for payment preparation, approval and review. Define permissions, limits, delegated authority and the process for changing bank account details. Keep approval evidence and an audit trail of important actions.
Also prepare for staff absences, connection failures and rejected payments. A continuity procedure should specify who decides, how to check instruction statuses and how to avoid duplicate submissions. Banking tools, the ERP and any TMS should support these business rules.
6. Implement a six-stage approach
- Map: identify accounts, banks, currencies, entities and payment processes.
- Improve reliability: reconcile data and assign its owners.
- Forecast: choose horizons, contributors and an update schedule.
- Control: formalise authority, approvals and continuity procedures.
- Optimise: review fees, balances and financing needs using available information.
- Monitor: measure variances, address exceptions and adjust practices.
7. Measure progress with useful indicators
Monitor account coverage, data freshness, forecast variances by cash flow category, overdue receivables and bank fees. Every indicator should have a definition, scope, period and owner. Targets are set according to the company’s circumstances.
Fictional example: a seasonal business identifies a timing gap between purchases and customer receipts. It strengthens receivables monitoring, updates its payment schedule and presents its bank with a documented forecast of the funding required.
Précis Consulting can help diagnose your cash flows and structure your cash management.
Sources and further reading
- Association of Corporate Treasurers — Is your IT up to the job? (April 2010)
- Association of Corporate Treasurers — A trip around the TMS (winter 2011)
- Association of Corporate Treasurers — Award in Cash Management Fundamentals (July 2016)
- Banque de France — Preparing a short-term business cash credit application (September 2023)
