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How corporate cash management helps business owners

Published on April 10, 2024 | LPL Financial

A successful business isn’t only about having an outstanding service or product that consumers desire. Success also includes managing day-to-day operations, strategic planning, and financial matters efficiently to create stability and growth for the company. Central to business success is corporate cash management, also known as treasury management. Understanding corporate cash management provides valuable insights to help business owners ensure business continuity in good times and challenging times.

What is corporate cash management?

Cash management is a multifaceted strategy designed to optimize a company’s financial operations and enhance profitability by efficiently managing liquidity and investments. Business owners must manage their capital in such a way that they can work toward their short-term financial obligations, make suitable investment decisions, and maintain a positive cash flow for their company. Here are some areas included within corporate cash management:

Managing cash flow

Cash flow management involves planning and controlling cash receipts and payments to ensure adequate cash is available when required. Better collection policies, efficient inventory management, and prudent purchasing procedures improve cash flow. The ability to manage the cash flow ensures predictability and security in operations, thereby reducing financial uncertainty.

Monitoring cash balances

Business owners must maintain a suitable cash balance and determine the appropriate level of cash required by analyzing their operating and financial cycles. Too much cash on hand may indicate lost investment or expansion opportunities, whereas having insufficient cash can disrupt company operations. Monitoring cash balances aids in maintaining an appropriate cash balance by providing timely and accurate financial forecasting.

Investment opportunities

Business owners can benefit from short-term investment opportunities through corporate cash management. Effective cash management prioritizes liquidity and recognizes the potential for returns from short-term investments. When surplus funds are available, they can be invested in low-risk, short-term investments, providing additional income for the company and thus boosting its overall profitability.

Banking relationships

Corporate cash management also assists in managing banking relationships, which involves effectively communicating with financial institutions to understand their service offerings and negotiating better terms. The interaction with banks and lenders is critical for business owners as it directly influences the cost of financial transactions and the availability of financial services.

Risk management

Moreover, corporate cash management incorporates risk management policies by identifying potential financial risks and creating measures to safeguard the company’s financial health from unforeseen disruptions. These risk management strategies may entail diversification of investments, restricting financial exposures, or purchasing insurance on sensitive company assets.

Professional guidance

Implementing suitable corporate cash management strategies and policies for a company must involve the appropriate people. These include the business owner, management, and specific company departments such as accounting, purchasing, etc.

It’s vital that business owners also include outside professionals, such as financial and tax professionals experienced in corporate cash management and working with business owners. Cross-collaboration with teams central to cash management must be adequate so that the execution of the company’s cash management strategy occurs promptly.


Corporate cash management may include using sophisticated technology to improve the company’s financial operations’ accuracy, speed, and ease, thus saving human capital hours. These technologies can range from automated payment arrangements to real-time tracking of financial transactions. By leveraging these technologies, business owners can benefit from managed operational costs, improved financial transparency, and enhanced decision-making capabilities. Here are examples of technologies that may enhance a company’s corporate cash management:

  • Banking APIs
  • Same Day payment technology
  • Direct bank (FTP) connections
  • ACH, SWIFT connectivity.
  • Two-way connectivity between bank and accounting solutions
  • Inventory management technology
  • Investment portfolio access and monitoring

Measurement and forecasting

When incorporating cash management best practices into a company’s overall growth strategy, appropriate measurement and forecasting must occur. This strategy includes estimating the amount of cash flowing into and out of a company and comparing the estimate to the actual cash flow over a period such as a month or quarter.

Once the measurement has occurred, the appropriate individuals receive the information and the forecasting updates. Measurement and forecasting are ongoing processes that may be affected by geopolitical factors, supply chain issues, economic factors, a skilled and ready workforce, etc., impacting the company’s profitability.

In conclusion, corporate cash management is vital in ensuring a company’s financial effectiveness and sustainability. By appropriately controlling cash flow, maintaining suitable cash balances, taking advantage of short-term investment opportunities, managing banking relationships, incorporating risk management, working with professionals, leveraging technology, and forecasting, the business owner can seek to optimize their financial operations and improve the stability and profitability of their company.





Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #536271

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