Companies want to manage their liquidity as efficiently as possible, especially those that operate in several countries and therefore hold accounts with many different banks.
Managing liquidity in this way can be particularly complex, and effective bank liquidity management relies on a centralized process to gain full visibility into the company's liquidity position. Liquidity management can be made more efficient with the use of digital technology and access to the sources of information about the corporate treasury departments.
Liquidity management is a compliment to Treasury Management, which can be understood as the planning, organization and control of the holding of funds, or working capital, of a company.
The goal of these finance departments is to make the best use of funds and maintain liquidity so as to reduce the overall cost of obtaining funds and to mitigate operational and financial risks.
These activities therefore cover:
- working capital management;
- currency management;
- financial risk management.
In simple terms, it is the management of all financial affairs of the company such as fund raising from various sources, currency management, cash flow and various financing strategies and procedures.