This lesson establishes the routine yet critical activities that form the core of treasury operations, focusing on how the treasury team manages the organization’s daily cash position.
1.1 Defining the Daily Cash Management Cycle
The daily cash management cycle is a set of processes that ensure the organization has sufficient liquidity to meet its obligations. A key learning outcome is to “Describe how the organisation’s cash and short-term liquidity requirements are managed” . The daily cycle typically involves several core activities:
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Monitoring Cash Positions: Treasury must have real-time visibility into the organization’s cash balances across all bank accounts.
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Reconciling Transaction Activity: A critical control to ensure accuracy, requiring treasury to “review cash balances and reconcile transaction activity” .
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Executing Cash Movements: This involves moving funds between accounts as needed, investing surplus cash, and arranging short-term borrowing.
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Forecasting Cash Flows: Preparing and updating short-term cash forecasts to anticipate future funding needs.
1.2 Managing Cash Receipts and Disbursements
The CTP exam outlines specific tasks, including “forecast/manage cash receipts and disbursements (cash flows)” as a core competency . Daily management requires understanding the timing and value of expected inflows and outflows from invoices, payroll, and other sources.
1.3 Performance Metrics
To manage the cash cycle effectively, treasury uses KPIs such as “Days Sales Outstanding (DSO) versus credit term, Days Inventory on Hand versus lead time, Days of Payables, and the Cash Conversion Cycle” . These metrics help treasury track how efficiently working capital is being managed and identify areas for improvement.