Put very simply, companies fail if they run out of cash or access to liquid funds. The clichéd phrase “cash is king” is as true as ever. A fundamental part of the cash and liquidity management process is planning ahead. Forecasts provide an understanding of where, when and in what currency your company will receive and provide payment. Cash forecasting is key and in particular it is critical to know the elements that can be flexed to conserve cash – such as deferring capital expenditure and holding back on repairs – while minimising the damage on your business capacity.
The primary responsibility of a corporate treasurer is to ensure the company has sufficient cash to meet all obligations and to function properly. The benefits include improved investment returns, the ability to negotiate better borrowing terms, minimising external borrowing, optimising the use of cash and avoiding unexpected results – both positive and negative.
