Treasury Management

Preface ix About the Author xi Part One Cash Management 1 Chapter 1 Treasury Department 3 Role of the Treasury Department 3 Treasury Controls 6 Treasurer Job Description 7 Position of Treasury within the Corporate Structure 7 Treasury Centralization 8 Treasury Compensation 10 Bank Relations 10 Treasury Outsourcing 13 Summary 18 Chapter 2 Cash Transfer Methods 21 Check Payments 21 Wire Transfers 27 ACH Payments 28 Procurement Cards 31 Cash Payments 32 Fees for Cash Transfers 32 Summary of Cash Transfer Methods 32 Cash Transfer Controls 34 Cash Transfer Procedures 43 Summary 48 Chapter 3 Cash Forecasting 49 Cash Forecasting Model 49 Information Sources for the Cash Forecast 53 Measuring Cash Forecast Accuracy 54 Cash Forecasting Automation 55 Bullwhip Effect 57 Business Cycle Forecasting 58 Cash Forecasting Controls 60 Cash Forecasting Policies 62 Cash Forecasting Procedure 62 Summary 62 Chapter 4 Cash Concentration 67 Benefits of Cash Concentration 67 Cash Concentration Strategies 69 Pooling Concepts 70 Physical Sweeping 70 Notional Pooling 73 Comparison of Account Sweeping and Notional Pooling 74 Nonpooling Situations 75 Bank Overlay Structure 75 Cash Concentration Controls 76 Cash Concentration Policies 78 Cash Concentration Procedures 79 Summary 81 Chapter 5 Working Capital Management 83 Working Capital Variability 83 Cash Management 85 Credit Management 85 Receivables Management 87 Inventory Management 88 Working Capital Metrics 95 Summary 102 Part Two Financing 103 Chapter 6 Debt Management 105 Types of Debt 105 Credit-Rating Agencies 116 Accounting for Debt 118 Debt-Related Controls 130 Debt-Related Policies 134 Debt-Related Procedures 135 Summary 136 Chapter 7 Equity Management 141 Stock Registration 141 Exemptions from Stock Registration 147 Accounting for Stock Sales 150 Equity-Related Controls 152 Equity-Related Policies 154 Equity-Related Procedures 156 Summary 163 Chapter 8 Investment Management 165 Investment Criteria 165 Investment Options 166 Investment Strategies 169 Outsourced Investment Management 172 Risk-Reduction Strategies 173 Accounting for Investments 174 Investment Journal Entries 182 Investment Reporting 188 Investment Management Controls 188 Investment Management Policies 191 Investment Management Procedures 195 Summary 199 Part Three Risk Management 205 Chapter 9 Foreign Exchange Risk Management 207 Foreign Exchange Quote Terminology 207 The Nature of Foreign Exchange Risk 208 Data Collection for Foreign Exchange Risk Management 209 Foreign Exchange Hedging Strategies 210 Hedge Accounting 223 Foreign Exchange Hedge Controls 232 Foreign Exchange Hedge Policies 234 Record Keeping for Foreign Exchange Hedging Activities 235 Foreign Exchange Hedge Procedures 236 Summary 238 Chapter 10 Interest Risk Management 239 Interest Risk Management Objectives 239 Interest Risk Management Strategies 240 Accounting for Interest Risk Management Activities 253 Interest Risk Management Policies 266 Record Keeping for Interest Rate Risk Management 267 Interest Risk Management Procedures 267 Summary 267 Part Four Treasury Systems 271 Chapter 11 Clearing and Settlement Systems 273 Characteristics of Clearing and Settlement Systems 273 Overview of the Clearing and Settlement Process 273 Fedwire 275 Automated Clearing House (ACH) System 275 Clearing House Interbank Payments System (CHIPS) 277 Check Clearing 278 The Continuous Link Settlement (CLS) System 280 Summary 281 Chapter 12 Treasury Systems 283 Treasurer’s Technology Needs 283 Treasury Management System 285 SWIFT Connectivity 287 Summary 288 Index 289