Effective cash and liquidity management is essential for any organisation, as it ensures that the company has the funds it needs to operate on a day-to-day basis and to take advantage of opportunities as they arise. A comprehensive corporate treasury cash and liquidity policy outlines the procedures and guidelines for managing the company's cash and liquidity in a manner that is consistent with its overall financial objectives. In this article we provide a high level example of the core tenets that underlie such a policy.
Policy Statement:
The purpose of this policy is to provide a framework for the management of the company's cash and liquidity, in order to ensure that the company has the funds it needs to operate on a day-to-day basis and to take advantage of commercial opportunities as they arise. The policy applies to all cash and liquidity management activities within the organisation, including cash and cash equivalents, short-term investments, and other liquid assets.
Cash Management:
The company's cash and cash equivalents are managed to ensure that they are sufficient to meet the company's daily operating needs and to take advantage of commercial opportunities as they arise. The company will maintain cash and cash equivalents in various accounts, including a primary operating account and other accounts as needed. The company will also maintain a cash balance forecast to project future cash needs and will regularly review and update this forecast as needed.
Liquidity Management:
The company will maintain sufficient liquidity to meet its short-term obligations and to take advantage of commercial opportunities as they arise. The company will manage its liquidity by maintaining a portfolio of short-term investments and other liquid assets, including access to a revolving credit facility, and will regularly review and update this portfolio as needed. The company will also maintain a liquidity forecast to project future liquidity needs and will regularly review and update this forecast as needed.
Investment Policy:
The company's investment policy is designed to ensure that the company's cash and cash equivalents are invested in a manner that is consistent with its overall financial objectives. The company will invest its cash and cash equivalents in a diversified portfolio of short-term investments, including bank deposits, money market funds, and other highly liquid investments. The company will also periodically review and update its investment policy as needed.
Conclusion:
A comprehensive corporate treasury cash and liquidity policy is essential for any organisation, as it ensures that the company has the funds it needs to operate on a day-to-day basis and to take advantage of commercial opportunities as they arise. The policy outlined here provides a high-level framework for the management of the company's cash and liquidity, and should be regularly reviewed and updated as needed to ensure that it remains consistent with the company's overall financial objectives.
Enquiries
For further information, please contact info@langdoncap.com
About the author
Sabbir Rahman is Managing Director of Langdon Capital and a Partner at Bridging Funding. He has held prior roles with Morgan Stanley, Lazard and Barclays Investment Bank. He has executed over £60 billion in notional value of transactions across financing, M&A and derivatives with global corporates, private equity funds and financial sponsor groups.
About Langdon Capital
Langdon Capital provides in-house transaction services to C-suites and Boards of publicly-listed and PE-backed businesses during the negotiation, execution and due diligence of corporate finance and capital markets transactions and senior interim resourcing solutions across finance, treasury, strategy and corporate development | contact info@langdoncap.com | visit www.langdoncap.com
About Bridging Funding
Bridging Funding is a private credit fund engaged in direct lending of commercial property bridging loans in the UK and select South-East Asian markets. We lend between £200k and £20m per transaction. As a private credit fund, our credit sanctioning process is leaner and more flexible than lenders funded by bank capital | contact sr@bridgingfunding.com | mention code “Langdon” for preferential rates | visit www.bridgingfunding.com
This is not financial advice or any offer, invitation or inducement to sell or provide financial products or services or to engage in any form of investment activity.
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