The implementation of a cash management system is essential to the company’s financing activities

Todd Gosserand, Vice-President, Risk Management and Treasury Projects, Groupe TAQA

Corporate finance is routinely found within the treasury department of all organizations, therefore, the technological advancements used within this department dictate their activities. Due to the complexity of financial decisions, the creation of the Automated Cash Management System (TMS) is the most critical technological advancement in corporate finance in the past decade. Using technology, the TMS allows a CFO, Treasurer, and Corporate CFO to have visibility into cash, investments, and debt. By implementing a TMS system, this technology will also ensure that a business will reduce fraud, increase competitiveness, streamline operations, manage risk exposures, eliminate errors that can potentially lose millions of dollars, and provide improved reporting. . The TMS provides the analytical tools needed to successfully execute an organization’s Corporate Finance activities in the most technologically advanced and holistic way.

Traditional corporate finance typically focuses on three tasks: the decision to undertake capital investments, short-term, operations-oriented financial decisions, and the sourcing of borrowings to meet a company’s long-term capital needs. a company. The following will describe how technological advancements in a cash management system support each of these activities in detail:

Decision to undertake capital investments

The TMS will allow an organization to run a discounted cash flow analysis to judge the viability of a project in a formalized way with advanced calculations. Additionally, the system will calculate the weighted cost of capital (WACC) which is essential for the DCF analysis. Additionally, the system will allow the business to compare each of the potential attempts in parallel to judge their viability or provide differentiation from a Required Rate of Return (RRR), which is also automatically calculated in the system.

Short-term operations-oriented financial decisions

The TMS will automatically create a cash flow projection from the underlying information collected by the accounting and financial system. This cash flow will help a business successfully manage cash in a systematic way that maximizes return on investment and minimizes issues associated with cash needed for operations. The system will also technologically adapt real-time adjustments based on unforeseen actual transactions so that decisions can be augmented to dynamically manage liquidity.

“Through technology, the TMS enables a CFO, Treasurer, and Corporate CFO to have visibility into cash, investments, and debt”

Obtaining debt to meet long-term capital needs

The system will support the analysis of the underlying characteristics needed to analyze historical rates, accurately price the transaction, manage the credit risk associated with the decision, and understand the company’s current debt structure to take a informed decision on adding new debt. Historical data is automatically entered into the system and debt pricing, both in present value and market value terms, is readily available. Additionally, a unique credit model is offered to analyze counterparties, and the portfolio’s current credit diversification is automated as well as the firm’s current fixed versus floating structure. Each of these attributes will be deliberately presented in unison as needed and are fully automated.

It is essential for Corporate Finance to eliminate the need for spreadsheets and adopt the technology associated with a cash management system to execute underlying activities in a more organized manner, create robust reporting and ensure consistency. underlying data necessary to make the best decision in regards to an organization’s best financial interests.

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