![]() ![]() To undertake all borrowing at or below budgeted rates on the basis of best value, and also seek opportunities to reduce the cost of servicing existing debt.To ensure that sufficient cash is available to enable the council to discharge its financial obligations when they become due.To effectively manage and control the risks associated with treasury management activities giving regard to the Code, and all relevant legislation, criteria and limits set within this report.The main strategic objectives of the Treasury Management Strategy are: ![]() These capital plans provide a guide to the borrowing need of the council, essentially the longer-term cash flow planning to ensure that the council can meet its capital spending obligations. The second main function of the treasury management operation is the funding of the council's capital plans. This provides adequate liquidity initially before considering investment return. Surplus monies are invested in low-risk counterparties or instruments commensurate with the council's low-risk appetite (security is paramount). Part of the treasury management operation is to ensure that this cash flow is adequately planned, with cash being available when it is needed. In other words, the goal is to make payments as late as possible, collect payments as early as possible, and keep inventories as tight as possible.The Treasury Management Strategy supports the council in meeting its requirement to operate a balanced budget. This broadly means that cash raised during the year will meet cash expenditure. We can use these three factors to determine the DCC (Days Cash Conversion) through a simple calculation: In order to do this, they aim to do three things: maximise their DSO (Days Sales Outstanding) and minimise their DIO (Days Of Inventory) and DPO (Days Payables Outstanding). The cash management function is also concerned with releasing working capital which may be tied up in assets like accounts receivables. Local financial authorities in many countries have banned or blocked the use of these methods, but new techniques are constantly being developed. Fortunately, there are several methods that can be used to do this – intercompany transfers, transfer pricing, and payment of dividends to name a few – and companies will typically explore various avenues in their efforts to do this. ![]() This blog explains in more detail what these in-country restrictions include.Īs we mentioned earlier, the difficult and important job of releasing trapped cash falls to the cash and liquidity management function. This occurs when there are regulations and constraints which limit cross-border money movement – something which is often seen in emerging markets. The following flow chart illustrates what this should look like in practice:Īs the name suggests, trapped cash is simply cash that is trapped in one location and can’t be moved to the centralised treasury. Together, both phases work to increase the profitability of the business. The second phase involves maximising the returns on any cash surplus in the concentrated cash pool or minimising the cost of funding any shortfalls. The first phase of cash and liquidity management involves maximising liquidity through releasing and centralising cash.
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