PDF Ebook Treasury Management Versus Cash Management
Major changes of corporate treasury management policies have been in the past few decades. Treasury management has gradually taken up more and more responsibilities. In the 1960s treasury-related tasks entailed purely routine work in what was no more than an ancillary function as a centralising cash management unit linked to administrative tasks. In the 1970s the first significant changes began to take place as the economic environment was hit by recession, which favoured the emergence of new short-term monetary policy instruments and the first hints of deregulation of financial markets, but treasury management was still restricted to the obtaining of funding, the management of payments and collections and the maintenance of bank balance positions. It was not until the 1980s that it became integrated into general corporate management and finally outgrew its purely administrative function linked to the accounting department. Treasury functions began to be based essentially on a financial cash management or liquidity management perspective. More recent advances (development of new information and communication technologies, emergence and use of new financial instruments and an approach to business focused on increasing the value of organisations in all areas) have favoured the development of new treasury management functions, and increased the importance of treasury departments within companies. In this way, now the techniques and instruments required for optimum development are available (Fernández, 2001).
The functions now linked to treasury management extend beyond the mere control of monetary flows and positions. Exchange-rate and interest-rate volatility in the wake of the internationalisation and deregulation of currency markets, the need to increase control of credit risk in increasingly competitive markets and the appearance of new financial instruments have forced treasury management to become more forecast-based in its actions, with more emphasis on the management of investments, treasury deficits and different financial risks. Basic responsibilities of treasury departments will be those tasks that enable companies to use the techniques and information needed to minimise the financial costs of resources and maximise returns on cash surpluses, thus providing them with the necessary treasury funding in the desired currency at the appropriate time, as argued by López (2003), and others.
In the terminology of cash management literature this term brings together various functions associated with short-term financial flow management: liquidity management, banking management, management of treasury surpluses and deficits and financial risk management; it is a broader concept than the mere management of payments and collections (treasury management). In this context, our objective is to provide empirical evidence for the definition of cash management by drawing up an explanatory model. The following pages present a cash management model obtained using the technique of structural equations, which has never been used before in research analysing the factors linked to treasury management.
A salient result of our model is that the management of payments and collections and treasury forecasts are the functions to which the companies surveyed attach most importance. These are the functions that have traditionally been most closely linked with treasury management, though others which have been incorporated more recently, such as management of bank balances at value date, management of relationships with banks, management of treasury deficit funding and management of treasury surpluses, are all also highly rated by companies.
The paper is structured as follows. Following the Introduction, the second section introduces the topic of cash management, highlighting features and issues of significance for the focus of this paper and reviewing some of the arguments in favour of the advanced cash management. The third section then describes the data and the analysis procedure used in the empirical study. The results of the investigation are shown in the fourth section. The final section presents the conclusions, and the paper ends with a list of bibliographical references.
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PDF Ebook Treasury Management Versus Cash Management
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