Organization of a centralized system of cash management requires.
- An information system;
- Planning of inflows and outflows;
- A centre of decision which balances the flows and takes decisions relating to
treasury.
- Information System
The treasurer of the regional centre or of the group should know the position of the cash
of subsidiaries on a day-to-day basis in a manner so as to be able to take appropriate
financial decisions (placement, use of short-term credit, compensation, etc.).
Centralization of the cash management at the regional level does not dispense a unit of
production or marketing from having its own treasury. The group or regional treasury
ensures coordination. It collects information based on which it could do cash planning.
Table 17.1(c) Company AM – Netherlands
Forecast ($000)
January current year
Previous Balance: - 75
Day Receipts Payments Balance
Monday 200 220 - 20
Tuesday 300 350 - 50
Wednesday 250 200 +50
Thursday 150 160 - 10
Friday 200 210 - 10- 40
These forecasts related to cash position of each subsidiary enable the regional centre to
effectively assess/manage the cash position.
- Forecasting of Cash Position.
The centre should coordinate the fund movements in a manner so as to minimize (and if
possible to avoid) unnecessary costs. To achieve this, it will be useful for the treasury
manager to know each day.
- Minimum cash required for each company;
- Net cash balance.
The minimum cash required for each company may be estimated from the average cash
needed over the period. Once these needs are estimated, the regional centre should
ensure that needs are met and excess cash if any, is appropriately dealt with (i.e.