Corporate Cash Management Trends

by Erin McCune on June 21, 2006

in Treasury & Cash Management

GTNews has published the results of its April 2006 survey of 586 readers (397 corporates) worldwide. The study finds that cash management responsibilities have expanded beyond managing payments and balances to include manipulating working capital to achieve greater business efficiencies and increase revenues.

Key trends identified by the survey are as follows:
(excerpts are in italics)


The survey results show that more corporates (39 per cent) want their
treasuries to manage cash management on a global basis in the future
while 29 per cent want global oversight with regional autonomy. Local
autonomy will decrease substantially; in fact, only 5 per cent of
corporate respondents say their treasury will have cash management
structures that allow for some level of local autonomy in the future.

There is tension between the desire for centralized global cash
management and the need for local business expertise in order to manage
territory specific working capital needs and support subsidiaries.

Cash Flow Forecasting

Cash flow forecasting processing continues to be a major challenge for corporates, followed by cash pooling, and purchase to pay.

For corporate respondents, the three biggest barriers to accurate cash
flow forecasting are the lack of systems integration (54 per cent),
inaccurate sales targets/projections (49 per cent) and lack of
inter-department communication (44 per cent). Below are some comments
from corporate respondents on these issues and the problems they face
with cash flow forecasting.

Sixty-two percent of corporate respondents are still using spreadsheets for cash forecasting. However, 27% anticipate shifting to an ERP cash forecasting module and 24% anticipate using specialized cash forecasting software provided by an external party.

Purchase to Pay and Order to Cash

Inconsistent data quality and a lack of standards inhibit automated cash application.

Respondents anticipate that treasury will play a larger role in improving AR and AP performance.

Shared services are expected to increase significantly:

More than one-third of corporate respondents indicate that they will
move towards managing their payments regionally and centrally at a
shared service centre (SSC) and the number of corporates who manage
payments globally and in a centralised structure at a SSC looks set to
double, according to the survey results.

Fifty-six per cent of corporate respondents currently reconcile
collections locally on a decentralised basis though the survey results
indicate that this figure will halve in the future. In correlation,
while only 16 per cent of corporate respondents reconcile collections
regionally centralised at a SSC now, this figure will almost double in
the future.

Cash Concentration & In-House Banking

Many corporates have recognized the value of in-house banking to reduce the cost of funds.

Among the corporate respondents, 26 per cent have an in-house bank in
place with internal funding/investments initiated by subsidiaries, 23
per cent have a regional cash concentration centre (overlay structure),
20 per cent have a global cash concentration centre (overlay structure)
and 19 per cent have a centralised structure. When considering these
results it is important to bear in mind that companies often use a
combination of these structures.

Survey Results: Corporate Trends in Cash Management
GTNews in association with SEB
June 20, 2006

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