Reducing the cash tied up in day-to-day operations, by managing receivables, payables and inventory.
The three levers are collecting from customers sooner, holding less stock, and using supplier payment terms fully without paying late.
Each franc released this way is a franc that need not be borrowed, which is why working capital is often a cheaper source of funding than credit.
A credit facility a bank makes available up to an agreed ceiling, which a company draws on as needed and repays, paying interest only on the amount used.
For a business it is a buffer against timing gaps: covering supplier payments and salaries while waiting on customer receipts, without borrowing a fixed sum in advance.
Common forms include an overdraft on a current account and a committed revolving facility.
A sub-account defined within a real bank account, used to identify who a payment came from without opening a separate account for each.
Each customer or purpose is assigned its own virtual account number. Payments arrive in the single real account but carry the virtual reference, so they can be allocated automatically.
In Switzerland, the QR-IBAN with a structured reference achieves much the same reconciliation outcome by a different route.
A Treasury Management System: software that consolidates bank balances, forecasts cash, executes payments and tracks financial risk in one place.
A TMS sits between the company's accounting system and its banks, and is what makes concentration, forecasting and a payment factory workable at scale.
Historically a tool for large corporates, though lighter cloud-based alternatives now serve smaller companies.
A centralised function that executes all of a group's outgoing payments, instead of each entity paying from its own accounts.
Entities submit payment requests, and the payment factory validates, batches and transmits them to the banks, typically as pain.001 files or through a bank API.
The gains are consistency of controls, fewer bank connections to maintain and lower transaction costs.
An organisational model in which one central function manages cash, financing, foreign exchange and risk for an entire group, rather than each entity doing so itself.
The benefits are negotiating power with banks, netting across entities, and one consolidated view of exposure. The cost is a layer of coordination and intercompany arrangements.
This is a model for groups with multiple entities, not for a single company.
A measure of how closely a cash forecast matched what actually happened, usually expressed as the variance between forecast and actual over a period.
It matters because decisions rest on the forecast: how much to keep liquid, whether to draw on credit, when to invest a surplus. A forecast that is consistently wrong in the same direction points to a fixable assumption, often customer payment behaviour.
Cash available to a company during the business day, as distinct from the closing balance.
A company may end the day comfortably positive yet be short at eleven in the morning, when a large payment leaves before customer receipts arrive. Intraday liquidity is about having funds at the moment each payment must settle.
Real-time payments and intraday reporting through camt.052 have made this easier to monitor.
Bringing the balances of several accounts together into one, physically or notionally, to manage the total rather than each account separately.
It improves interest terms and gives a single view of available cash. Notional pooling is restricted or unavailable in some jurisdictions.
An automated bank arrangement that moves balances between accounts at the end of each day, so that funds end up where they are needed.
Typically, surpluses are swept up to a main account and deficits covered from it, leaving subsidiary accounts at a target balance, often zero.
The purpose is to avoid holding idle cash in one account while paying overdraft interest on another.
The management of a company's cash: knowing what is available, where it sits, and making sure obligations can be met without holding more idle cash than necessary.
It spans monitoring balances across accounts, forecasting inflows and outflows, covering shortfalls and placing surpluses.
For a small company this is a weekly look at the bank balance. For a group with subsidiaries it becomes a structured discipline with dedicated tools, which is where most of the terms in this section come from.
