Intro Video Transcript

Hello everybody and welcome to today's webinar Cash Management Overview. My name is Veselina. I have multiple years of Post MBA experience in corporate treasury with different companies, most recently six years we Yahoo, managing the company's multi-million investment portfolio and share repurchase program were among my responsibilities. I'm glad I have this opportunity today to share with you what I learned about cash management the last few years. My focus will be on the practice go aspect and I'm hoping I'll presented learnings, recommendations and tips that you find helpful for your specific case. So here is what we're going to talk about today. We are gonna start with the steps of the cash management process- cash positioning, cash forecast, fundig and investments and how to define whether you're gonna need funding or you may need find good investment for your cash. We gonna learn how to develop the cash forecast which will help us define whether we need funding or you may need to invest excess cash we gonna talk about the available options for funding and how to make the best decision for your company and finally we're gonna learn how to divide total cash into different layers with different characteristics and how to design an optimal investment strategy for every single layer. Since gonna talked a lot about cash management today I thought it would be a good idea to start with a review of the goals of the cash management. First of all, the Goal cash management is to maintain appropriate cash availability at any point of time, than in case your projections show that you're not gonna have enough cash in the future that the goal, your goal should be the goal is to ensure that you secure access to funding at the lowest total cost, in case your forecast shows that you're gonna have excess cash then the challenges is to invest this excess cash generated return and maximize this return while minimizing the risk associated with this investments. Unfortunately there is no universal solution for cash management that's gonna work for every single company because the reality is that the cash management for each company depends on the dynamics of the company's business depends the dynamics of the cash inflows and outflows it depends on the company's structure and maturity and so on then at the same time it also depends on the current and future market environment and it also depends on the risk tolerance of the management team. So to summarise there are a lot of factors that define the cash management for every company and the purpose of today's conversation would be to provide recommendations that there're gonna be applicable for everybody just please take this warnings and recommendations and applying them for your specific case. I'm certainly hoping you'll find all of them helpful. So, let's start with a review of the cash management challenge. On these light I show just something that you probably very familiar with. This is what happens on a daily basis perhaps your bank account and I have two examples. On the ground at the top I have an example of they want when you collect cash from clients or some other sources then you make couple of payments than at the end of the day, it happens that you have excess cash in your bank account. This is scared that you don't need to have in the bank account because you're not gonna get any return from it. So, you probably transfer this excess cash to something that will now I call cash storage. Then the example in the bottom, we have a differently when you again collect some cash from clients then you make some payments, but it happened that you made a payment of $20 which resulted in a negative balance at the end of the day you know the words given the flows during the day it happened that you're not gonna have enough cash in your bank account to cover all the payments and in this case perhaps you gonna access these cash for each and you're gonna transfer funds from the storage to your bank account because I am sure you all know that you should always have enough cash in your bank account to cover all of the payment and the bank should never be negative. So now let's look at the same activity, the same cache storage but long-term. So you can see that all these daily net cash bounces negative or positive, a fact cash storage. When you have positive bounce, this increases the cash storage, when you have a negative bounce and you transfer funds from the cash storage in the bank account, the cash storage size decreases. So, I need to make a note here that the size and the form and the form of the cash storage, of course I am gonna give you significantly from company to company. Some company generates a lot of cash. For these companies the cash storage is gonna be much larger. For these companies the real challenge actually is to find a way to invest all these excess cash and generate return because otherwise it's a lot of opportunity. For other companies that don't generate so much cash on a daily basis than the cash storage is going to be much smaller and for them that the challenge would be to make sure that they always have cash available and if they projected they're not have enough cash than to find a way to secure funding at the lowest cost possible. I also have something I call minimum level. So that that's the minimum level of the cash that Treasury need the maintain in any point of time to make sure that all of the payments can go through and really the key challenge, one of the key challenges actually of cash management is to define whether these minimum level is because what is important to know where the minimum levels right now but what's really more important is to be able to evaluate where these minimum level should be in the future. Having said that its lead out to the top be cash forecasting.