AWARD IN CASH MANAGEMENT FUNDAMENTALS

This unit is designed as an overview of both the corporate and banking worlds and provides insights into their respective contexts. 

Firstly, the role of the treasurer is examined and where cash management fits within that role. Most importantly it offers a working definition of good cash management and the resulting benefits to the company. Fundamental cash management concepts are described including the operating cycle, the cash flow cycle, the nature of cash flows, the importance of liquidity, finality, availability and float, where it arises, what causes it and how to reduce it.

Secondly, this unit explores the basics of banking. Topics include the role of the central bank, different roles a financial institution can play, types of account and the documentation required to open them, as well as how banks make their money and ways in which companies can seek to reduce their overall banking costs. The impact of Basel III on how banks manage their credit risk and balance sheet is also examined.

Lastly this unit reviews the various instruments that are used for making payments and their respective impact on cash flow.
 

On completing unit one you will be able to:

1. Describe the role of treasury and cash management including the factors that influence how those functions are performed within a company.
2. Define cash management from both the bank and corporate perspectives and explain why it is important to companies.
3. Explain the significance of liquidity to a company and the sources, uses and cost of maintaining liquidity.
4. Comprehend important cash management concepts such as the cash flow cycle, float, finality, availability and the time value of money and describe how these concepts are used by cash managers.
5. Recognise where float arises in the supply chain process and recommend what can be done to reduce float
6. List the main duties of a bank and describe the differences between types of bank account.
7. Calculate interest on a bank account.
8. Describe the different types of charges levied for bank services and the techniques that can be used to reduce bank fees.
9. Evaluate the advantages and disadvantages of different payment types (electronic and paper–based) and recommend appropriate payment vehicles for different transactions and situations.
10. Be aware of regional preferences and know which payment instruments are favoured in which countries.
11. Explain the impact of Basel III on the banking sector and treasurers.

This unit explains how the financial statements are used by different parties to better understand and manage the company. It reviews and defines the components of the balance sheet, income statement, statement of changes in equity and statement of cash flows. It also describes the important ratios used by cash managers and financial institutions in assessing a company’s liquidity and cost of capital.

The current accounts (current assets and current liabilities) are also the key to managing working capital, ie freeing up liquidity to fund current operations. This unit discusses how the cash manager can improve these balance sheet items by ensuring that monies due in (receivables or debtors) are received as quickly as possible, and that monies due out (payables or creditors) are timed to be paid only when due. While not strictly responsible for inventory, the cash manager can also influence business practices to accelerate the conversion of inventory into receivables and cash. Analysing certain balance sheet items provides valuable insights into the cash conversion cycle and how efficiently a company is using its liquidity. Nonetheless, these aspects have to be managed within a broader business context, taking into account:

• Commercial relationships
• The economic environment
• The business environment (whether domestic or international)
• The banking environment
• The company’s own corporate culture and organisation

Lastly, this unit reviews the trade financing vehicles that can be used to release cash back into the operating cycle and the specialised bank services designed to help a company manage float.

On completing unit two you will be able to:

1. Analyse how a company is being managed through the interpretation of a company’s financial statements.
2. Perform simple financial analysis by computing important financial ratios, such as liquidity, gearing and performance ratios.
3. Critically assess accounts receivable and accounts payable in order to recommend how the organisation can optimise working capital.
4. Recommend improvements to the cash conversion cycle through the calculation of the cash conversion cycle and the value of trade discounts.
5. Identify the ways in which cash can be released back into the operating cycle using trade financing vehicles.
6. Evaluate the benefits of banking services designed to manage float, and quantify the benefits of using a lockbox.