The Challenges of Global Cash Management

Are you suffering from sub-optimal global cash management? Even though group treasuries in many multinational organizations have already taken steps to centralize their financial processes, they still find themselves struggling with inadequate visibility over group-level cash and exposures.

At the same time, finance organizations need to provide their companies with more and more information and insight to support their strategy and success. This increases the pressure on treasurers and cash managers to gain a firm grip on the company-wide cash flows and working capital.

Although the challenge is clear, the reasons for the difficulties in global cash management often vary. Here are four key questions to ask yourself when you want to discover the root causes of the situation.

The team is carrying process weight from the past

It might be that the decentralized, complex structure has developed over time and the sub-optimized and inconsistent processes have gone unnoticed, creating hiding places for cash.  For example, if an organization grows through mergers, it can easily end up with a variety of payment systems and processes in different countries, which poses challenges to global cash management. Or locally operated units may use their own systems, and group treasury has to settle for weekly spreadsheet reports rather than real-time information.

In many corporations, the amount of trading and invoicing between subsidiaries has grown considerably, but the processes concerning the internal transactions remain disparate and inefficient.

Clear visibility over all of your bank accounts

A frequent source of headaches for group treasurers is poor visibility over bank accounts. Gaining a comprehensive overview of all the bank accounts and their up-to-date balances is a tedious task in an operating environment of multiple subsidiaries and business units in multiple countries and banks.

When you tot it up, the total time spent administering bank accounts and managing bank proxies takes most cash managers by surprise – and it is all time away from performing value-adding treasury services and global cash management.

Challenges with working capital imbalances?

A common pain point is decentralized cash, or more precisely, the imbalance that it causes. On the one hand, you have subsidiaries that hoard cash into their local bank accounts. On the other hand, you have subsidiaries that negotiate loans with their local banks without leveraging the economies of scale for more attractive rates.

Stuck in the middle is the group treasurer, in charge of global cash management, striving to make the most out of the working capital at a group level. The best performers in terms of working capital management are able to scrutinize their expenses and locate the liquidity needed for investments. The difference between the top and the median level performers can be surprisingly large - and can even define the future success of the companies.

Leaks in your operational budget?

If subsidiaries act in silos, the group treasury may end up paying out unnecessary costs and banking fees. Let’s take foreign currency exchange fees as an example. If subsidiaries are allowed to pay FX invoices from their local bank accounts, the cost of currency exchange can create surprising leaks in the treasury’s operational budget.