The Cash Management is a term that has become very fashionable in recent years, especially as a result of the pandemic. Cash Management, can really apply to both individuals and companies. It is true that this concept of Anglo-Saxon origin is commonly used in the business field, especially within finance departments. In short, this term refers to money management, that is, to the management of collections, payments, and the treasury of a company. This term is therefore a fairly specific concept in the financial field and not everyone is familiar with it.

Until the SARS-CoV-2 (COVID-19) pandemic, cash management or “Cash Management” did not have such an important role within finance departments, or at least it was not an area that was valued as it should . The crisis caused by the pandemic, in which thousands of companies found themselves in extreme situations, with significant drops in sales, and uncertain future forecasts, made Cash Management become the number one topic within financial departments, and the main topic discussed in all the boards of directors of the companies. In short, as they say today, “cash is King”, or “money is king”. The company’s cash control, as well as its forecast, and the control and visibility of future cash inflows and outflows have gained unprecedented importance.

The number of functions that can be part of the procedures corresponding to Cash Management can be quite extensive. These tasks or functions will depend a lot on the type of company and its size. Among the main functions that revolve around Cash Management, we can highlight the following:

• Current cash situation management
• Management of banks and relations with other banks
• Collections or receivable accounts management
• Payments or payable accounts management
• Financing sources management

Next, we will proceed to explain one by one in more detail each of the main functions carried out by finance professionals in the field of Cash Management. It should be noted that, in some cases, these functions may fall to a single person, however, it is quite common for these tasks to fall to several members of the team, although in the end, the person who responds is responsible for the financial team or treasury, in case the company has a specific team to deal with this issue.

One of the main tasks of the finance team, and the treasury team if there is one, is to carry out treasury analyzes and reports to reflect the current cash position of the company, as well as the future forecast of is.

One of the typical reports that are prepared in the financial area to reflect the current cash status is the “Cash Flow Statement”, or State of Cash Flows in Spanish. This report is used to show, typically month by month, the status of cash inflows and outflows, along with the initial and final cash balance. This report is therefore used to show the true and real state of the company’s cash position. It should be noted that this is one of the main reports that a monthly financial report of any company can contain.

On the other hand, also in relation to the cash situation, it is quite common for financial departments to prepare a financial model on the one hand, and separately, a liquidity model. The first is generally a file in Excel format where a numerical simulation of the company is created, and future estimates of the company’s situation are made based on hypotheses about sales projections, expenses and any other variable that may be important. for the company. These financial models are usually long-term models that normally include up to 5-year projections.

On the other hand, the liquidity model is usually also a financial model, but in the short term. Generally around 12 months. The objective of this type of analysis is somewhat different from that of the main long-term financial model of the company. The first tries to provide a future vision of the company, and the second model has a much more short-term vision. That is why this model is much more detailed and, furthermore, it normally has much more true and real information points than those long-term hypotheses. As it may be obvious, making a forecast for one or several months in the future can be much more accurate than for years in the future. This type of analysis usually analyzes what happens to the cash situation if there is a default on a collection, what happens if there is an extraordinary expense, etc. In this way, the company will be much more prepared to face any event.

Bank management is also a very important task totally related to Cash Management. Bank management involves first choosing which banks to open accounts with, and then maintaining a good relationship with them. Having a precise monitoring process for these accounts, checking that there are no strange inputs or outputs and even making use of banking management digitization software, is part of this work that financiers have today. Currently, opening an account with one bank or another can have a very big impact. The experience with one and the other varies a lot and, therefore, choosing a good bank and making this cash management efficient can save many hours of management.

Receivable accounts management is a very important task in finance departments. The importance of having a healthy treasury in the company makes the collection process vital. Finance teams aim to collect outstanding invoices as soon as possible. The main reason for this is that if collections are late, the company’s ability to execute certain payments is jeopardized. It goes without saying that a delay in the collection process jeopardizes being able to make payments of great importance such as payroll, taxes, or social security, this can jeopardize the viability of the company. That is why this function is one of the most important in the finance team, and having maximum visibility of the status of collections is vital for a finance team.

Payable accounts management is also an important task for all companies. In this sense, it also depends a bit on the size and impact that a provider has on a company. The main supplier of the company is not the same as the supplier that provides office supplies. Apart from maintaining a good relationship with suppliers, it is very important to have a positive relationship regarding the status of payments, that is, paying on time. To do this, you need software that makes payments and streamlines the entire flow of payments. This can avoid problems with the company’s main suppliers.

On the other hand, it is important to carry out a feasibility analysis of the company’s main suppliers, that is, those that could have an impact on the company if they disappeared. For this, it is convenient to adequately monitor the main suppliers and carry out risk analysis on them, to avoid that for any reason the company goes bankrupt or disappears, and our company is seriously harmed by the disappearance of that supplier.

One of the most complex tasks of the finance teams, and of the people in charge of tasks related to Cash Management and treasury management, is the management of financing sources. Among these, we can highlight both investor relationship development tasks and, therefore, raising capital from private investors, as well as relationship development tasks with bank and non-bank or alternative sources of financing. Since the knowledge of how a financing contract works is very complex, the people who carry out this type of activity usually have many years of experience in the area of finance. The main tasks of this function are to identify the optimal sources of financing that a company needs, and proceed to the execution of the achievement of these.

The tasks related to Cash Management are generally carried out by different people. Although the chief financial officer or CFO has ultimate responsibility for all of these functions, much of the tasks are divided among multiple team members. The person or persons responsible for the main treasury tasks vary according to the type of company and its size. In large companies there is the figure of the treasurer. A person with extensive experience in all the tasks described, as well as having very technical knowledge. In smaller companies, these tasks may be performed by either the CFO, or even the founder of the company. In addition, finance team personnel such as people in charge of accounting, accounts receivable, and accounts payable complete the group of people who usually participate in all these types of tasks.

Snab is a pioneer treasury cloud platform in Europe, which helps precisely in each and every one of the functions and tasks related to Cash Management and treasury management that we mentioned previously. Snab acts primarily as a bank aggregator, allowing companies to access all their bank accounts at different banks and in different countries with absolute independence. In addition, Snab serves as a payment and collection management tool, giving full control and visibility to accounts payable and receivable functions. Snab not only shows you alerts and helps you monitor the status of payments and collections, but also generates treasury forecasts in real time, based on both historical and future information.