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Optimizing Company Cash: A Guide For Financial Professionals

Optimizing Company Cash: A Guide For Financial Professionals

Authors
Publisher John Wiley & Sons Inc
Year 01/02/2018
Pages 296
Version paperback
Readership level Professional and scholarly
ISBN 9780870516542
Categories Financial accounting, Corporate finance
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$93.58 / €80.90 / £71.16 /
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Book description

Optimizing Company Cash provides a comprehensive guide to all elements of cash management in a business including: * Inflows * Outflows * Cash conversion cycles * Short-term borrowing and investing * International business * How to structure a corporate treasury function In over 200 pages, the Guide explains how CPAs and financial managers can manage their company's short-term resources to sustain ongoing activities, mobilize funds and optimize liquidity. It also provides diagrams of work flows, step-by-step checklists, templates, and treasury tips for CPAs and finance managers who are responsible for making the most of working capital and short-term resources.

Optimizing Company Cash: A Guide For Financial Professionals

book_contentlist

List of Exhibits xvii Foreword xxi Acknowledgments xxiii Chapter 1 A Cash Manager s Perspective on Company Financials 1 Chapter Goals 1 Introduction 1 Interrelationship of the Operating, Cash, and Accounting Cycles 2 Important Metrics 3 Liquidity Ratios 3 Leverage Ratios 5 Capital Structure Weighted Average Cost of Capital 5 Performance Measures 6 Efficiency Ratios 6 Risk-Adjusted Performance Measures 6 Risk Management 9 Worked Examples of Company Metrics 9 Practical Applications 11 Summary of Key Points 12 Chapter 2 It s All About the Bottom Line! 13 Chapter Goals 13 Introduction 13 The Major Functions of Cash Management 14 Factors That Influence the Cash Manager s Role 16 A Representative Organization Chart 16 Important Cash Management Concepts 17 Cash Flow Timeline 17 Financial Float 18 Availability 18 Finality 19 Opportunity Cost of Funds 20 Transaction Balances 20 Time Value of Money 20 Nature of Cash Flows 22 Practical Applications 22 Summary of Key Points 22 Chapter 3 Optimizing Liquidity 23 Chapter Goals 23 Introduction 23 Liquidity Management 23 Cash Is King 24 Float in the Financial Supply Chain 24 Sources and Uses of Liquidity 26 Optimizing Working Capital 26 Cash Conversion Cycle 27 Calculating How Much Liquidity a Company Needs 28 Costs of Too Little Liquidity 28 Working Capital Gap Management 29 Practical Applications 30 Summary of Key Points 30 Chapter 4 The United States Banking System 31 Chapter Goals 31 Introduction 31 Structure of the United States Banking System 31 Federal Reserve Bank 32 A Dual Banking System 32 Major Banking Legislation 33 Impact of Current Legislation 33 Nationwide Branching 33 Patriot Act 34 Sarbanes-Oxley Act 34 Check 21 35 Federal Reserve Regulations 35 Uniform Commercial Code 36 Practical Applications 37 Summary of Key Points 37 Chapter 5 Types of Payment Instruments 43 Chapter Goals 43 Introduction 44 Important Terminology 44 Clearing 44 Settlement 44 Real-Time Gross Settlement 44 Net Settlement Systems 44 Settlement Risk 45 Contents ix Hybrid Settlement 45 Transaction Types 45 Payment Practices in the United States 45 Check Payments 47 Check Terminology 47 Characteristics of a Check 48 The Real Cost of Paying by Check 49 The Truth About Disbursement Float 50 The Check Clearing Process 50 Advantages and Disadvantages of Using Checks 54 Electronic Checks and the Role of Imaging and Truncation 54 Electronic Payments 55 The Fedwire Process 55 The Clearing House Interbank Payment System 56 The Automated Clearing House 58 Other Payment Types 61 Cash 61 Plastic: Charge, Credit, Debit, and P-Cards 61 Selection and Comparison of Payment Types 62 Practical Applications 63 Summary of Key Points 63 Chapter 6 Optimizing Cash Inflows Part 1: Accounts Receivable 65 Chapter Goals 65 Introduction 65 Cash Inflow Float 65 Establishing a Credit Policy 66 The Five C s of Credit Evaluation 67 Sources of Credit Information 67 The Credit Scoring Model 67 Terms of Sale 68 Terms of Sales 69 Discount Terms 69 Invoicing 70 The Accounts Receivable Process 71 Checklist for Automating Accounts Receivables Processing 72 Monitoring Accounts Receivable 73 How to Improve Accounts Receivable 74 Practical Applications 74 Summary of Key Points 75 Chapter 7 Optimizing Cash Inflows Part 2: Collections 77 Chapter Goals 77 Introduction 77 Collection Float 78 Objectives of a Collection System 79 Explaining Funds Availability 79 Managing Collection Float 80 Types of Lockboxes 81 Lockbox Networks 81 How to Perform the Cost-Benefit Analysis of a Lockbox 82 Elements of Lockbox Pricing 83 Cost Comparison of Collection Methods 84 Recent Trends and Changes in Collections 85 Expansion of Bank Networks 85 Impact of Check 21 88 Remote Deposit Capture 88 Rise of the Automated Clearing House 88 Improvements in Imaging 88 Use of the Internet 88 Integrated Receivables 88 Cash Management Tips for More Efficient Collections 89 Practical Applications 90 Summary of Key Points 90 Chapter 8 Optimizing Cash Inflows Part 3: Concentration 91 Chapter Goals 91 Introduction 91 Concentration Float 92 Objectives of a Concentration System 92 Optimizing Liquidity 92 Information Float 93 Transfer Float 94 Making Concentration More Efficient 95 When to Use an Electronic Depository Transfer or a Wire 95 Using Appropriate Formats 96 Frequency of Transfers 96 Target Balances 96 Anticipating Deposits and Availability 96 Costs of Concentration 97 Optimizing Concentration 97 Practical Applications 99 Summary of Key Points 99 Chapter 9 Optimizing Cash Outflows 101 Chapter Goals 101 Introduction 102 Cash Outflow Float 102 Objectives of a Disbursement System 102 Considerations When Designing a Disbursement System 103 Specialized Disbursement Vehicles 103 Zero Balance Accounts 103 Controlled Disbursement 104 Payable Through Drafts 106 Multiple Drawee Checks 106 Sight and Time Drafts 106 Direct Deposit 106 Payroll Cards 107 Internet Payments 107 Comparison of Payment Costs 107 Considerations in Converting Paper to Electronic Payments 108 Factors Driving Migration 109 Barriers to Electronic Payments 109 Implementation of Electronic Payments 109 Outsourcing Disbursements 111 Cash Management Tips for More Efficient Disbursement 112 Trends in Payment Practices 113 Practical Applications 113 Summary of Key Points 113 Chapter 10 Fraud Prevention and Control 115 Chapter Goals 115 Introduction 115 Where Fraud Occurs 115 Fraud Detection 116 Fraud Prevention 117 What the Banks Are Doing 117 What the Company Can Do 118 Purchasing Cards 120 Securing PCs Physically 120 Resources 121 Practical Applications 121 Summary of Key Points 121 Chapter 11 Cash Forecasting 123 Chapter Goals 123 Introduction 123 Why Cash Forecasting Is Important 123 Key Drivers of Cash Forecasting 124 Sources of Data 125 Forecasting Methods 126 Short-Term Forecasts 126 Medium-Term Forecasts 127 Long-Term Forecasts 131 What to Consider When Designing a Forecasting System 132 Practical Applications 132 Summary of Key Points 133 Chapter 12 Short-Term Investing 135 Chapter Goals 135 Introduction 135 Investment Objectives 135 Developing Investment Policy Guidelines 136 What the Credit Ratings Mean 137 Instruments Used for Short-Term Investments 139 Government Issues 139 Bank and Broker Vehicles 141 Corporate Instruments 143 Risk and Return Comparison 144 Factors That Influence Investment Yields 145 Calculating and Comparing Yields 145 Investment Strategies 147 Is Outsourcing Right for Your Company? 147 Investment Tips for the Cash Manager 148 Practical Applications 149 Summary of Key Points 149 Chapter 13 Short-Term Borrowing 151 Chapter Goals 151 Introduction 151 Borrowing Objectives 151 Short-Term Borrowing Options 152 Short-Term Sources of Funds 152 Short-Term Borrowing Instruments 153 Factors that Influence the Cost of Borrowing 155 What to Look for in a Loan Agreement 158 Recommendations for Managing Short-Term Debt 159 Practical Applications 160 Summary of Key Points 160 Chapter 14 Doing Business Internationally 161 Chapter Goals 161 Introduction 161 Making International Payments 161 Paper Payments 163 Electronic Payments 163 Receiving Payments from Overseas 165 Payment by Check 165 Electronic Payments 166 What You Need to Know About Foreign Currency Accounts 167 Managing Foreign Exchange Exposure 169 FX Risk 169 FX Risk Management Policy 169 Developing an FX Hedging Strategy 170 International Trade Vehicles 172 Cash in Advance 173 Letter of Credit (L/C) 173 Documentary Collection 173 Counter Trade 173 Open Account 174 A Word on Notional Pooling 174 Improving International Payments 175 Practical Applications 176 Summary of Key Points 176 Chapter 15 Using Technology to Manage Treasury 177 Chapter Goals 177 Introduction 177 The Treasury Management System 178 Information Reporting 179 Internal Information 179 External Information 180 Transaction Initiation 182 Advanced and Specialized Modules 183 Options in Selecting a Treasury Management System 184 Type of System 184 Access Method 185 Internet-Based Systems 185 How to Select a Treasury System Vendor 186 Conduct a Vendor Search 186 Prepare Vendor Short List 187 The RFP Process 188 Preparing an RFP 188 Select a Vendor 189 Finalize the Details 190 A Word on Standardization 191 Practical Applications 191 Summary of Key Points 192 Chapter 16 Optimizing Banking Relationships 193 Chapter Goals 193 Introduction 193 Objectives of Bank Relationship Management 193 How Many Banks Are Enough? 194 Types of Banking Relationships 194 Standards for Evaluating Performance 195 Why Have a Service Level Agreement? 196 Key Items to Include in an SLA 196 Account Analysis 198 Reading the Account Analysis Statement 199 What to Check on the Account Analysis 201 Bank Compensation Practices 201 Negotiating Bank Fees 202 Practical Applications 203 Summary of Key Points 203 Chapter 17 The Bank Selection Process 205 Chapter Goals 205 Introduction 205 Selection of a Financial Services Provider 205 The RFP Process Step 1: Prepare the RFP 206 Format of the RFP 206 Critical Selection Criteria 207 Sample RFP Questions 209 The RFP Process Step 2: Analyze the Responses 211 Methodology for Evaluating Responses 211 The RFP Process Step 3: The Presentation 211 The RFP Process Other Considerations 213 Should You Use a Consultant? 213 How to Use an RFP Template 213 Pricing 213 Practical Applications 214 Summary of Key Points 214 Chapter 18 The Treasury Structure 215 Chapter Goals 215 Introduction 215 Organizational Design 216 Centralized Versus Decentralized Treasury Organization 217 Corporate Governance and Internal Control 220 Drafting Treasury Policy and Procedures 220 Roles and Responsibilities 222 Authority Limits 223 Management Reporting 224 Key Treasury Controls 225 Measurement and Management 226 Code of Conduct for Treasury 226 Treasury Audit 227 Performing a Review of the Treasury Function 228 Practical Applications 228 Summary of Key Points 230 Chapter 19 Outsourcing Treasury 231 Chapter Goals 231 Introduction 231 Progressive Centralization of Treasury 231 Shared Service Center 233 The In-House Bank 235 Outsourcing 236 Why Outsource? 237 What to Outsource? 238 The Virtual Treasurer 239 Selecting an Outsourcing Partner 239 Drawbacks of Outsourcing 243 How to Outsource Successfully 243 Practical Applications 244 Summary of Key Points 244 Chapter 20 The Way Forward 245 Chapter Goals 245 Introduction 245 Issues Facing Treasury 245 Summary of Treasury Best Practices 247 Company Financial Structure 247 The Banking Environment 247 Optimizing Liquidity 247 Collections and Concentration 248 Payments 248 Fraud Prevention 248 Doing Business Internationally 248 Banking Structure 249 Treasury Structure 249 Technology 249 Your Role as a Financial Professional 250 Practical Applications 250 Summary of Key Points 250 Appendixes Useful Sources of Information 251 Useful Sources for Online Information 255 Lockbox Providers 259 Controlled Disbursement Providers 261 Sample Ethical Code 263 Index 265

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