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Mastering Cash and Liquidity: The Key to Unlocking Business Value

Effective cash and liquidity management is essential for any organisation, as it ensures that the company has the funds it needs to operate on a day-to-day basis and to take advantage of opportunities as they arise. A comprehensive corporate treasury cash and liquidity policy outlines the procedures and guidelines for managing the company's cash and liquidity in a manner that is consistent with its overall financial objectives. In this article we provide a high level example of the core tenets that underlie such a policy.


Policy Statement:


The purpose of this policy is to provide a framework for the management of the company's cash and liquidity, in order to ensure that the company has the funds it needs to operate on a day-to-day basis and to take advantage of commercial opportunities as they arise. The policy applies to all cash and liquidity management activities within the organisation, including cash and cash equivalents, short-term investments, and other liquid assets.


Cash Management:


The company's cash and cash equivalents are managed to ensure that they are sufficient to meet the company's daily operating needs and to take advantage of commercial opportunities as they arise. The company will maintain cash and cash equivalents in various accounts, including a primary operating account and other accounts as needed. The company will also maintain a cash balance forecast to project future cash needs and will regularly review and update this forecast as needed.


Liquidity Management:


The company will maintain sufficient liquidity to meet its short-term obligations and to take advantage of commercial opportunities as they arise. The company will manage its liquidity by maintaining a portfolio of short-term investments and other liquid assets, including access to a revolving credit facility, and will regularly review and update this portfolio as needed. The company will also maintain a liquidity forecast to project future liquidity needs and will regularly review and update this forecast as needed.


Investment Policy:


The company's investment policy is designed to ensure that the company's cash and cash equivalents are invested in a manner that is consistent with its overall financial objectives. The company will invest its cash and cash equivalents in a diversified portfolio of short-term investments, including bank deposits, money market funds, and other highly liquid investments. The company will also periodically review and update its investment policy as needed.


Conclusion:


A comprehensive corporate treasury cash and liquidity policy is essential for any organisation, as it ensures that the company has the funds it needs to operate on a day-to-day basis and to take advantage of commercial opportunities as they arise. The policy outlined here provides a high-level framework for the management of the company's cash and liquidity, and should be regularly reviewed and updated as needed to ensure that it remains consistent with the company's overall financial objectives.


Enquiries


For further information, please contact info@langdoncap.com


About the author


Sabbir Rahman is Managing Director of Langdon Capital and a Partner at Bridging Funding. He has held prior roles with Morgan Stanley, Lazard and Barclays Investment Bank. He has executed over £60 billion in notional value of transactions across financing, M&A and derivatives with global corporates, private equity funds and financial sponsor groups.


About Langdon Capital


Langdon Capital provides in-house transaction services to C-suites and Boards of publicly-listed and PE-backed businesses during the negotiation, execution and due diligence of corporate finance and capital markets transactions and senior interim resourcing solutions across finance, treasury, strategy and corporate development | contact info@langdoncap.com | visit www.langdoncap.com


About Bridging Funding


Bridging Funding is a private credit fund engaged in direct lending of commercial property bridging loans in the UK and select South-East Asian markets. We lend between £200k and £20m per transaction. As a private credit fund, our credit sanctioning process is leaner and more flexible than lenders funded by bank capital | contact sr@bridgingfunding.com | mention code “Langdon” for preferential rates | visit www.bridgingfunding.com



This is not financial advice or any offer, invitation or inducement to sell or provide financial products or services or to engage in any form of investment activity.

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Langdon Capital is a trading name of Langdon Capital Limited, a company registered in England & Wales with company number 12600771 and registered offices at 71-75 Shelton Street, Covent Garden, London, WC2H 9FF.

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Langdon Capital Limited is an intermediary and not a principal investor. Langdon Capital's activities are not regulated by the Financial Conduct Authority (FCA) as they fall outside the scope of PERG 2.7, "Activities: a broad outline," of the FCA handbook, or within its exemptions. Langdon Capital introduces Businesses and Individuals seeking capital for business purposes (collectively "Investees" or "Clients") to principal investors in debt and equity (collectively "Capital Providers"), with the output of such engagements being investment decisions made by Capital Providers, not transactions. Transactions are subsequently concluded directly between Capital Providers and Investees, without the involvement of Langdon Capital. The act of supplying information about Investees to Capital Providers does not imply, or extend to, making recommendations to Capital Providers and therefore does not constitute the regulated activity of ‘Advising on Investments.’ ​Langdon Capital only introduces Individual Investees to Capital Providers when exemptions to PERG 2.7 are met under the following conditions: (1) the introduction is made only in the context of a property loan; (2) loan proceeds are only to be used for commercial purposes; (3) the loan amount is greater than £25,000; (4) if land is used as collateral for the loan, then less than 40% of the land is used for dwelling purposes by the borrower; and (5) the borrower signs a declaration which provides that loan proceeds shall be used wholly for business purposes and that the borrower agrees to forgo the protection and remedies that would be available to them if the agreement were a regulated consumer credit agreement. Langdon Capital earns fees from Investees and some Capital Providers and discloses commissions to its Clients.

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