Cash management

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Cash management or liquidity management referred to in the Business Administration a concept in financial management .

Purpose and objectives of cash management

  • The term cash management describes all measures of short-term financial management in the company . It includes all tasks and measures that are carried out to ensure liquidity and to achieve maximum efficiency in payment transactions. Cash management goes beyond pure financial management, as active, target-oriented control of liquidity is carried out here with the aim of ensuring and maintaining the company's solvency.
  • As a sub-area of ​​financial management, cash management is usually located in the treasury area. Cash management can be carried out either directly at the group parent company or via a group's own financing company in Germany or abroad.
  • Another objective is to achieve a defined profitability of the funds used. This means maximizing the interest income for surpluses and minimizing transaction costs. In addition, it is necessary to ensure that the risks associated with cash management are minimized. A risk management system should establish guidelines for the use of credit institutions , financial instruments and markets.
  • Derived from the core task of liquidity management, one of the tasks of cash management is also to ensure that bank accounts are optimally linked. For example, a company that has several branches with its own bank accounts in the euro area must ensure that the available liquidity in these accounts is concentrated in a central account or that liquidity shortfalls are compensated for in these accounts. Cash management mostly uses so-called zero balancing , an account balancing process offered by banks.

The structure of the cash management

With regard to international cash management, a distinction is made between four central areas of responsibility for cash management:

Liquidity planning

In liquidity planning , all incoming and outgoing payments are recorded and netted for a specific period in order to provide an overview of the liquidity situation, i.e. H. to receive any surpluses or shortfalls. To precisely determine the current solvency, a daily liquidity status is created based on the account balances and data from the financial accounting . In addition, future-oriented liquidity planning is carried out by drawing up financial plans with a short to medium-term planning period . The further the plans extend into the future, the lower their planning accuracy is as a rule. The information obtained through planning then forms the basis for all decisions and processes in the area of ​​cash management.

Disposition of liquid funds

The central task of cash management is the disposition of liquid funds. It includes measures to cover liquidity deficits and to invest liquidity surpluses. Cash management must react appropriately to both foreseeable and unpredictable liquidity fluctuations. Liquidity deficits must be compensated for by short-term loan financing in order to ensure willingness to pay. Any excess liquidity, however, must be invested with interest. The decisions about appropriate forms of capital procurement or investment must be made on the basis of the given strategic framework in the area of financing .

Design of payment flows

The aim is to transfer payments as cheaply as possible. The aim is to reduce the costs of capital movements, such as bank charges or internal processing costs. An instrument that is frequently used in cash management to reduce these costs is netting . Netting - or group clearing, which is used synonymously in the literature - is the offsetting of group-internal receivables and liabilities on a specific reference date. These can e.g. B. result from unilateral or reciprocal delivery and service transactions. Depending on the number of group companies included, a further distinction can be made between bilateral and multilateral netting. Multinational netting is mostly used in multinational corporations , as delivery and service interlinkages usually exist between several group companies. The intragroup receivables and liabilities are recorded centrally and, after being converted into a base currency, summarized in a clearing matrix. This results in the net receivables and liabilities of the group companies, which are settled by transfers on specified dates.

Currency risk management

In the case of cross-border activities by corporations, different currency and economic areas must be observed. The exchange rate problem is particularly important here, as changes in exchange rates harbor a number of economic risks, such as B. when converting balance sheet items of foreign companies. The task of currency management in the context of cash management is to limit exchange rate risks through appropriate hedging measures, e.g. in the context of a foreign exchange netting.


Situational liquidity analysis

  • Monitor daily deposits and withdrawals
  • Opening balance + inflow - outflow> = 0

Creation and release of liquidity reserves


  Internal financing External financing
Self-financing Retention of profits

z. B. Profit is retained

Equity financing (capital increase)

z. B. Stock issue

Debt financing self-generated borrowed capital

z. B. Provisions form

Loan financing

z. B. Loans, bonds

Structural liquidity assurance

Liquidity policy in the event of a crisis

  • What-if-scenarios
  • Prepare strategies
    • Lowering expenses
    • Postpone expenses
    • Bringing income forward (selling assets)
  • Create a catalog of measures

Advantages and disadvantages of cash management


  • optimal utilization of liquid funds
  • Avoiding external donors
  • Lower central liquidity reserve
  • Reduction of bank-related costs
  • Compensation of currency risks
  • Economies of scale in financing
  • Transparency and flexibility
  • Uniform financial management
  • specialization
  • Insolvency risks are reduced


  • Central department costs
  • Dependence on the central liquidity supply
  • Risk of risk transfer
  • Focus on short term profit
  • Administrative burden (bureaucratization)
  • Loss of independence
  • Decision distance
  • Transparency of the financial situation towards third parties
  • Dependence on the provider of the cash management system


  • Mark W. Hormuth: Law and practice of group-wide cash management. A contribution to group financing. Duncker & Humblot, Berlin 1998, ISBN 3-428-09575-8 ( corporate, corporate law and corporate finance 8 = studies on savings, giro and credit systems B 116), (also: Darmstadt, Techn. Univ., Diss., 1997).

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