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Introduction to Cash and Treasury Management

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Recently, the world has been hit by the huge phenomenon named the financial crisis. During the financial crisis in 2008, even the largest corporations have had to face a massive downturn in their cash management and treasury management. Any business is created with the aim of making profit. Therefore cash management is the lifeblood of a company and is fundamental to its very existence. Cash management comprises of a series of activities meant at efficiently handling the inflow and outflow of cash. Cash may refer to either cash in the form of currency or take other equivalent such as cheques, drafts and deposits. Cash is the critical resource in the short and medium term. Lack of control over cash management can be very harmful to businesses. In fact, it is the improper management of cash that has caused businesses to fail.

On the other hand, treasury management consists of the efficient utilization of cash in a manner consistent with the overall strategic objectives of the firm. It is the heart of business from a liquidity, risk and funding point of view. It includes activities like trading in bonds, currencies, financial derivatives and also encompasses the associated financial risk management. However, the main function of treasury management is to establish the optimum cash level so that payment can be made and received for the proper operation of the company.

Sometimes the term treasury management and cash management are used interchangeably while, in fact, the scope of treasury management is larger as compared to cash management.

The public sector can be defined as that portion of society controlled by state or local governments. Another definition of the public sector is that part of the economy which is controlled or supported financially by the government. From the point of view of international practices, countries that are most advanced in cash management are Australia, Canada, Finland, New Zealand, Sweden, united Kingdom and United states. In contrast the private sector is that part of the economy that is not state controlled, and is run by individuals and companies for profit. The private sector encompasses all for-profit businesses that are not owned or operated by the government.

Comparing cash management and treasury in both private sector and public sector, there is a gap in between both the latter. In public sector, financial measures are mandatory. Cash management decisions are partly taken for political reasons. Therefore government spends money mainly when approved by parliamentary. In contrast to private sector, there are always the options about whether to spend and what to spend. Private sectors are always trying to innovate their finance department in order to provide a more effective cash and treasury management to its clients.

Hence, this workshop has been written in order



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