Cash Management Trends

By – Ashish Sharma

The quality of cash management services being provided.
Current cash management product usage and Trends
Quantify buyer attitudes towards pricing of cash management services.
Determine company plans and intentions for current banking relationships, product purchases, and
Cash management projects over the next year.

The Drive Towards Efficiency, Transparency, Standardization and Integration
PAYMENTS CONVERGENCE:
TRENDING TOWARDS ELECTRONIC
Increasing Payment Alternatives for Consumers
Accelerating Momentum for Corporate Payments
Digitizing What Remains — Check Electronification
Towards Strategic Receivables Management
THE CONVERGENCE OF CASH, TRADE, LIQUIDITY AND RISK
Managing Risk, Ensuring Adequate Controls
THE BEST IS YET TO COME

Traditionally having a paper-based clearing system involving not only high processing cost but security risk, cash management process has certainly undergone a paradigm change.
From a product-centric approach, the focus for almost all banks today has shifted emphatically to the customer. And success is all about bringing the maximum possible delivery channels to the prospect's doorstep .
The objective of a cash management system is to improve revenue, maximise profits, minimise costs and establish efficient management systems to assist and accelerate growth.
Today a corporate treasurer's dilemma is multifaceted. With more movement towards the regional/central liquidity management in the complex structure of rules and regulations, further complication is caused by taxation issues.
A corporate treasurer needs as VOC - Visibility of funds, Optimised returns on funds, and Control over receivables and payables.
Treasury can face a number of issues related to the slow movement of funds, locked working capital, loss of float income, high cost of funds, time consuming reconciliation and manual processes.
In India the cash management business primarily involves collections and payments services.

COLLECTIONS
Local cheque collections.
High value (0 Day clearing).
Agnetic ink character recognition (MICR) (three day clearing of cheques).
Outstation cheque collections.
Cheques drawn on branch locations.
Cheques drawn on correspondent bank locations.
Cheques drawn on coordinator locations.
House cheque collections.
Outside network cheque collections.
Cash collections.
ECS-Debit.
Post dated cheque collections.
Invoice collections.
Capital market collections.
PAYMENTS
Demand drafts/bankers cheques.
Customer cheques.
Locally payable.
Payable at par.
RTGS/NEFT/ECS.
Cash disbursement.
Payments within bank.
Capital market payments.

A BRIEF INTRODUCTION:

STATE BANK OF INDIA provides cash management services to Corporate Clients under the brand name SBI-FAST (Funds Available in Shortest Time).

SBI FAST ensures optimization of collections and payouts while ensuring predictability in the cash flows.

SBI FAST ensures getting Funds in time, quick transfers, account reconciliation, easy disbursements, controlled processes and customized MIS.

SBIFAST eliminates the inherent delays of the traditional funds transfer mechanism and enhances liquidity to ensure optimum planning and utilization of funds.

File upload facility over web based portal and which can provide complete Host to Host facility for Payments and e- collections.

Centralized Control of cash
Interest Cost reduction on borrowings
Enhanced Liquidity
Interchange of Information between Treasury & Operating units
Cash forecasting & scheduling
Effective control over disbursements
Efficient Financial Management

There are a number of regulatory and policy changes that have facilitated an efficient cash management system ( CMS ).
Fox example, the Enactment of Information Technology Act gives legal recognition to electronic records and digital signatures.
The establishment of the Clearing Corporation of India in order to establish a safe institutional structure for the clearing and settlement of trades in foreign exchange (FX), money and debt markets has indeed helped the development of financial infrastructure in terms of clearing and settlement.
Other innovations that have supported in streamlining the process are:
Introduction of the Centralised Funds Management Service to facilitate better management of fund flows.
Structured Financial Messaging Solution, a communication protocol for intra-bank and interbank messages.

Account reconciliation services
Balancing a chequebook for a very large business can be quite a difficult process. Banks have developed a system to overcome this issue. They allow companies to upload a list of all the cheques whereby at the end of the month, the bank statement will show not only the cleared cheques but also uncleared ones.
Positive pay
An effective anti-fraud measure for cheque disbursements. Using the cheque issuance data, updated regularly with cheque issuance and payment, the bank balances all cheques offered for payment. In the case of any discrepancies, the cheque is reported as an exception and is returne
Balance reporting services
Balance reporting provides help in procuring a company's current banking information from its accounts. With this service the banks can offer almost all types of transaction-specific details on activities related to payment like deposits, cheques, wire transfers etc. It also helps in an effective and efficient management of regular cash flow.
Lockbox
Facilitates the cash improvement where, instead of being delivered to business address, customer payments are delivered to a special post office (PO) box. It is only the customers' payments that are delivered in the PO box and the company's own bank collects the amount and delivers them to the banks of the customers. The bank of the customers opens and processes the payments for direct deposit to the bank account. Lockbox contents regularly removed and processe

Current Cash Management Issues and Trends
An important outcome of the 2008 survey was the ranking of top issues affecting the cash management – Via 2008 Visa Global cash mgt survey
Changes in technology were identified as having the greatest positive impact on cash flow management, while global economic and geopolitical issues were seen as having the greatest negative impact.
Issues Affecting Cash Flow Management
Changes in Technology 70%
Changes in Corporate Governance/Regulatory Concerns 63%
Changes in Tax Laws 62%
Changes in Organization’s Policies 62%
Global Economic and Geopolitical Issues 57%

Lack of Streamlined
Operational Processes
Labor-Intensive
Administrative Work
Inadequate Information and
Reporting Capabilities
Sluggish Cash Flow Movement
Poor Cash Position Visibility

Reduction of Administrative and Process Costs
Elimination of Paper-Based
Invoicing and Payments
Facilitates Payables and Receivables
Use of Transaction Data for Better Vendor Pricing/Negotiation

Process Streamlining Leading to Cost Reduction
Enhanced Compliance with Corporate Policies and Procedures
Automating Expense
Reconciliation Processes
Use of Card Transaction Data for Better Pricing Negotiation
Availability of Transaction Data for Spend Analysis

Four variables that are strongly related to a corporation giving more business to a bank.
Company’s perception of a positive change in the bank’s quality,
The number of relationship
Whether the company believes that the bank represents a “prime relationship”, and
Whether the company added a new E-Commerce/ Internet-based product
Statistical relationship between more business and the number of years that a company has done business with the bank,
The size of the current relationship as measured by fees paid,
The size of the relationship as measured by the credit outstanding

Banks have invested quite heavily in new, technology-based products in the last few years.
In the Cash Management Monitor, Banks analyses on Five of these new product areas.
Quality
Product
Consolidations
Pricing
Plans
Business-To-Business Electronic Commerce (B2B e-commerce)
Business-To-Consumer Electronic Commerce (B2C e-commerce)

ABN-AMRO / La Salle
Allfirst KeyCorp
AmSouth
Bank of America
Bank of New York
Bank One
Bankers Trust Company
Chase
Citibank
Comerica Bank
Commerce Bancshares
First Tennessee
First Union
Firstar
Fleet Boston
Wells Fargo
Huntington National Bank
Marshall & Ilsley
Mellon Bank
Mercantile Bank
Michigan National Bank
Morgan Guaranty
National City Bank
Northern Trust Company
PNC Bank
State Street Bank
SunTrust
Union Bank of California
US Bank
Wachovia
Harris Trust and Savings

HSBC voted 'Best Cash Management Bank in Middle East and Africa' by TMI

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Cash Management Trends

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