![]() ![]() The cash management function is also concerned with releasing working capital which may be tied up in assets like accounts receivables. Local financial authorities in many countries have banned or blocked the use of these methods, but new techniques are constantly being developed. Fortunately, there are several methods that can be used to do this – intercompany transfers, transfer pricing, and payment of dividends to name a few – and companies will typically explore various avenues in their efforts to do this. This blog explains in more detail what these in-country restrictions include.Īs we mentioned earlier, the difficult and important job of releasing trapped cash falls to the cash and liquidity management function. This occurs when there are regulations and constraints which limit cross-border money movement – something which is often seen in emerging markets. The following flow chart illustrates what this should look like in practice:Īs the name suggests, trapped cash is simply cash that is trapped in one location and can’t be moved to the centralised treasury. Together, both phases work to increase the profitability of the business. The second phase involves maximising the returns on any cash surplus in the concentrated cash pool or minimising the cost of funding any shortfalls. The first phase of cash and liquidity management involves maximising liquidity through releasing and centralising cash.
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