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Capital Markets

Making the most of surplus cash

Automation of short-term investment is at the cutting edge of cash management, but deciding how to take advantage of this is not easy. Banks are making an effort to rationalize the routines involved.

AS THE GLOBAL economy picks up and companies build up liquidity and cash reserves, many of them are looking to the next step: how to improve returns from surplus cash.

With cash forecasting having been the focus for the past few years – when companies worried about scarcity of bank credit during the downturn and how to husband their cash resources – those that now have a clear picture of their flows can start to look at improving the process by which they invest that cash for the short term.

If corporate treasurers wait for cash position information to flow into treasury systems and then spend time researching investment decisions and calling up banks for pricing, they might lose a day's float. By automating this process, they can increase returns on short-term liquidity, cut out the float that is left if they don't concentrate and invest their offset position within the company's varied global entities.

Andrew England, head of product management at Deutsche Bank, relates the growing interest in this process to companies' persistent caution about investing for growth and desire to sweat higher returns from the cash that they are hoarding: "If you look at the current corporate space, companies have more cash at their disposal," he says.

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