Cash Management Supplement Summer 2012
Fixing the flaws
Fears of liquidity meltdown may have receded as the global financial system slowly recovers from the crisis of 2007–08, but significant cash management challenges still lie ahead for treasurers.
Treasury professionals showed their mettle in the wake of the credit crunch, finding funds to replace the shortfall from the banks by turning to the bond market and US private placements, and, nearer to home, by releasing trapped cash and improving working capital management.
Treasurers deserve credit for the financing that has been completed, but there can be no sense that the job is finished. The immediate liquidity challenges of the last few years are masking some of the longer-term problems that have so far eluded satisfactory solutions.
The May issue of The Treasurer highlighted a survey conducted by Ernst & Young which should have reminded treasurers of the weaknesses that are shared by many global orporations: alongside refinancing challenges many treasuries struggle to work as effectively as possible with the business units to improve overall liquidity management. The absence of good data and intelligent information means that cash forecasting remains a poorly practised art rather than a science. As the economy improves, treasurers must ot allow the structural weaknesses to be glossed over. Both strategy and technology need to be deployed urgently to make cash collection and payments fit for purpose.