Optimization of the company's cash flow
This book is about the company's treasuries and financial management, more specifically; it shows how a company can manage its treasury in an efficient and short way. This book is about the company's treasuries and financial management, more specifically; it shows how a company can manage its treasury in an efficient and short way.
SECTION II: THE CONDITIONS OF FINANCIAL EQUILIBRIUM ....................................................................................... 39 I. The prospective analysis of the variations of cash: The explanation of the financial balance ................. 40 A. The flow of fund accounting ............................................................................................................... 40 1. Historic Flows ............................................................................................................................... 40 2. The flows of operations ................................................................................................................ 41 B. Accounting flows and Cash-Flow ........................................................................................................ 41 1. The implicit assumptions of assimilation of accounting flows to cash-flows .............................. 41 2. The limits to the assimilation of accounting flows to cash-flows................................................. 42 C. The limits of analysis of the “Variations of Cash” .............................................................................. 43 1. The array of variations of cash is actually a static document ...................................................... 43 2. The array of changes in Cash is synthetic document ................................................................... 44 3. Array of financing and cash balance ............................................................................................. 44 3.1. The Method “Revenue – Expenses” ..................................................................................... 46 3.1.1. The principle of the method ..................................................................................... 46 3.1.2. Limitations of the method ........................................................................................ 48 3.2. Prediction method “Resources –Needs” .............................................................................. 49 3.2.1. Presentation of the cash flow forecast in terms of “Resources and Needs” ........... 50 3.2.2. Estimates of cash flows in terms of “Resources needs” .......................................... 51 CHAPTER 2: MONETARY INFLOWS AND CASH-TREASURY .......................................................................................... 53 SECTION I: MONETARY CASH OF THE FIRM ................................................................................................................. 53 I. Preference for liquidity and inventory management ................................................................................ 53 A. Ground for cash, and detention of liquidity ....................................................................................... 54 1. The reasons for detention of liquidity .......................................................................................... 54 2. The formalization of the monetary stock ..................................................................................... 54 3. The structure of Cash ................................................................................................................... 54 B. The essential variables involved in the determination of the optimal amount of cash ..................... 55 1. The nature, behavior and volume of the cash-flows ................................................................... 55 2. Transaction costs and revenues associated with the “Securities” .............................................. 55 3. The duration of the period of the cash flows forecast ................................................................. 56 4. Minimum critical balance of cash ................................................................................................. 56 5. The chosen safety margin ............................................................................................................ 57 C. Modelization of the company’s monetary inflows management ....................................................... 57 1. The concept of “Cash Reserve” rethink ........................................................................................ 58 1.1. The failures of analysis to prove the existence of reserves inside IWACO’s treasury ........... 58 1.2. Dsynchronization of cash flow and liquidity detention ......................................................... 59 1.3. The assumption of the unexpected and the detention of liquidity ....................................... 60 2. The treasury-cash funding using the stock management ............................................................ 61 2.1. The “Transfer Policy” as an equilibrium tool of cash-treasury: Transfer inert-agencies ....... 61 2.2. The assumption of the homogeneous nature of the funds ................................................... 62 CHAPTER 3: METHODOLOGY OF THE STUDY ............................................................................................................... 64 I. Presentation of the study .......................................................................................................................... 64 II. Data collection tools .................................................................................................................................. 67 Page 16 of 124
SECOND PART: THE PRACTICE OF THE CASH TREASURY OPTIMIZATION INSIDE IWACO’S COMPANY ..................... 69 CHAPTER 4: GENERAL PRESENTATION OF THE COMPANY IWACO ............................................................................ 70 I. Internal environment ................................................................................................................................ 70 A. Organizational structure ..................................................................................................................... 70 B. Organization and functions ................................................................................................................. 72 II. External environment ................................................................................................................................ 73 A. Company’s operating field .................................................................................................................. 73 1. Market .......................................................................................................................................... 73 2. Supplier: WANNA Corporate ........................................................................................................ 74 3. Client ............................................................................................................................................. 74 B. Dynamical competition ....................................................................................................................... 75 CHAPTER 5: THE MINIMIZATION OF THE VOLUME OF MONETARY ASSETS .............................................................. 76 SECTION I: INFLOWS GLOBAL MANAGEMENT ............................................................................................................ 76 I. The control of cash flow and cost savings ................................................................................................. 76 A. Formalization of the Idle cash ............................................................................................................. 76 1. The lack of blank balances ............................................................................................................ 76 2. The fear of the debit balances ...................................................................................................... 78 3. The importance of unused funds and its consequences .............................................................. 78 B. The unnecessary costs of the idle funds ............................................................................................. 80 1. The structure of the cost of money .............................................................................................. 80 2. Scales of interest quarterly........................................................................................................... 80 3. The assessments of costs in the traditional cash-management .................................................. 84 3.1. The analysis of the conditions of bank .................................................................................. 87 3.1.1. Expressed as a percentage of banking conditions: Rates ......................................... 87 3.2. The costs of banking services ................................................................................................. 88 3.2.1. Offer of the company to the bankers ....................................................................... 88 3.2.2. Operating account measures the company’s offer to its bankers............................ 89 SECTION II: CASH FLOW FORECASTING ....................................................................................................................... 90 I. Analysis of the Cash flows ......................................................................................................................... 90 A. Treasury-data collection system ......................................................................................................... 90 B. Knowledge of the structure of cash receipts and disbursements ...................................................... 92 1. The structure of receipts of the firm ............................................................................................ 92 2. The structure of the disbursement of IWACO .............................................................................. 93 C. The reduction of uncertainty in certain movements of funds ............................................................ 93 1. Sensitivity analysis ........................................................................................................................ 94 2. The streamlining of procedures for billing and recovering .......................................................... 95 3. The centralization of liquidity management ................................................................................ 97 II. The reasoned slowdown of the settlement of debts ................................................................................ 97 A. The rational establishment of due dates ............................................................................................ 97 B. The choice of the payment instruments ............................................................................................. 98 Page 17 of 124
- Page 1 and 2: Page 1 of 124
- Page 3 and 4: The Optimization of the Cash-Treasu
- Page 5 and 6: FOREWORD Nor obtaining the diploma
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- Page 9 and 10: This project research is dedicated
- Page 11 and 12: LIST OF ACRONYMS AND ABBREVIATION
- Page 13 and 14: Figure n°1: Determination of the o
- Page 15: TABLE OF CONTENTS Foreword ........
- Page 19 and 20: ABSTRACT Inside a world full of ban
- Page 21 and 22: In addition, the monetary risk is a
- Page 23 and 24: A good financial situation is chara
- Page 25 and 26: Experience and observation prove th
- Page 27 and 28: Whereas part of stocks was practica
- Page 29 and 30: C = ax² + bx + c When the demand a
- Page 31 and 32: The “Stocks” flow time: Average
- Page 33 and 34: It indicates to what extent the rea
- Page 35 and 36: RESULTS + FINANCIAL INTERESTS / FIN
- Page 37 and 38: ANNUAL SALES H.T / NET FIXED ASSETS
- Page 39 and 40: 4 - LIMITS THE PREDICTIVE VALUE OF
- Page 41 and 42: This opposition led to the establis
- Page 43 and 44: It will similarly be to calculate t
- Page 45 and 46: However, this document synthesizes
- Page 47 and 48: The cash has then for each day (or
- Page 49 and 50: (b) SHORT-TERM DATA: Beyond the ver
- Page 51 and 52: These three presentations are well
- Page 53 and 54: Manage cash consists, in the tradit
- Page 55 and 56: Anyway many authors have developed
- Page 57 and 58: Either they consist on interest or
- Page 59 and 60: (a) Economies of scale in the deten
- Page 61 and 62: Type of Risk Analyze the Risk Evalu
- Page 63 and 64: They may have originated an investm
- Page 65 and 66: I. PRESENTATION OF THE ANALYSIS MOD
SECOND PART: THE PRACTICE OF THE CASH TREASURY OPTIMIZATION INSIDE IWACO’S COMPANY ..................... 69<br />
CHAPTER 4: GENERAL PRESENTATION OF THE COMPANY IWACO ............................................................................ 70<br />
I. Internal environment ................................................................................................................................ 70<br />
A. Organizational structure ..................................................................................................................... 70<br />
B. Organization and functions ................................................................................................................. 72<br />
II. External environment ................................................................................................................................ 73<br />
A. Company’s operating field .................................................................................................................. 73<br />
1. Market .......................................................................................................................................... 73<br />
2. Supplier: WANNA Corporate ........................................................................................................ 74<br />
3. Client ............................................................................................................................................. 74<br />
B. Dynamical competition ....................................................................................................................... 75<br />
CHAPTER 5: THE MINIMIZATION OF THE VOLUME OF MONETARY ASSETS .............................................................. 76<br />
SECTION I: INFLOWS GLOBAL MANAGEMENT ............................................................................................................ 76<br />
I. The control <strong>of</strong> <strong>cash</strong> <strong>flow</strong> and cost savings ................................................................................................. 76<br />
A. Formalization <strong>of</strong> <strong>the</strong> Idle <strong>cash</strong> ............................................................................................................. 76<br />
1. The lack <strong>of</strong> blank balances ............................................................................................................ 76<br />
2. The fear <strong>of</strong> <strong>the</strong> debit balances ...................................................................................................... 78<br />
3. The importance <strong>of</strong> unused funds and its consequences .............................................................. 78<br />
B. The unnecessary costs <strong>of</strong> <strong>the</strong> idle funds ............................................................................................. 80<br />
1. The structure <strong>of</strong> <strong>the</strong> cost <strong>of</strong> money .............................................................................................. 80<br />
2. Scales <strong>of</strong> interest quarterly........................................................................................................... 80<br />
3. The assessments <strong>of</strong> costs in <strong>the</strong> traditional <strong>cash</strong>-management .................................................. 84<br />
3.1. The analysis <strong>of</strong> <strong>the</strong> conditions <strong>of</strong> bank .................................................................................. 87<br />
3.1.1. Expressed as a percentage <strong>of</strong> banking conditions: Rates ......................................... 87<br />
3.2. The costs <strong>of</strong> banking services ................................................................................................. 88<br />
3.2.1. Offer <strong>of</strong> <strong>the</strong> company to <strong>the</strong> bankers ....................................................................... 88<br />
3.2.2. Operating account measures <strong>the</strong> company’s <strong>of</strong>fer to its bankers............................ 89<br />
SECTION II: CASH FLOW FORECASTING ....................................................................................................................... 90<br />
I. Analysis <strong>of</strong> <strong>the</strong> Cash <strong>flow</strong>s ......................................................................................................................... 90<br />
A. Treasury-data collection system ......................................................................................................... 90<br />
B. Knowledge <strong>of</strong> <strong>the</strong> structure <strong>of</strong> <strong>cash</strong> receipts and disbursements ...................................................... 92<br />
1. The structure <strong>of</strong> receipts <strong>of</strong> <strong>the</strong> firm ............................................................................................ 92<br />
2. The structure <strong>of</strong> <strong>the</strong> disbursement <strong>of</strong> IWACO .............................................................................. 93<br />
C. The reduction <strong>of</strong> uncertainty in certain movements <strong>of</strong> funds ............................................................ 93<br />
1. Sensitivity analysis ........................................................................................................................ 94<br />
2. The streamlining <strong>of</strong> procedures for billing and recovering .......................................................... 95<br />
3. The centralization <strong>of</strong> liquidity management ................................................................................ 97<br />
II. The reasoned slowdown <strong>of</strong> <strong>the</strong> settlement <strong>of</strong> debts ................................................................................ 97<br />
A. The rational establishment <strong>of</strong> due dates ............................................................................................ 97<br />
B. The choice <strong>of</strong> <strong>the</strong> payment instruments ............................................................................................. 98<br />
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