What is International Cash Management?

International Cash ManagementMoney is considered by most business professionals to be the life blood of a company, and international cash management is an important consideration for businesses that want to play on the global stage. Cash management strategies of all businesses seek to maximize the availability of cash that is not allocated for fixed asset investment. These cash reserves help them to resolve unexpected financial issues, continue expansion initiatives that promote competitiveness and preserve their corporate credit worthiness. Cash management in domestic markets is a challenging endeavor, but companies that operate in international markets face even more complex issues when it comes to managing their cash. These issues stem from things like differences in national banking policies and regulations as well as unstable currencies in a number of foreign markets, according to EuroMoney. Here are some key global cash management considerations that are common concerns of growing businesses.

Cash Collection and Disbursement Systems

The inability of a company to promptly collect money that is owed to it makes cash management more difficult. This is why many business managers invest in information technology tools that expand payment options for customers and allow for quicker payment processing. However, these business professionals can experience obstacles when payments reach banks, and businesses that are used to efficient banking practices may need to tweak their cash management policies when they enter foreign markets. For example, a multinational company that receives payment from customers for goods or services can make deposits at banks, and the funds will be available for use within two days in some countries. That same company can make a deposit with a foreign bank and have to wait up to five days to use their funds.

Compliance with Conflicting National Legislation

Financial privacy for individuals and businesses has all but disappeared in certain markets in the wake of scandalous financial schemes and terror threats. While most countries show solidarity when it comes to condemning widespread theft and terror, they differ in how legislation and financial policies are used to combat these issues. For example, some countries’ banks may adhere to laws that provide checks and balances to protect their business clients’ data from exposure. However, other banks like those in the United States must comply with policies that support laws like the Patriot Act that requires maximum disclosure of financial data. These laws can slow down efficient access to cash.

Non-Standard Banking International Cash Management Systems

The demand for standardized international cash management policies and procedures by multinational companies is steadily growing. Revamping the global financial system to bring about more efficient international cash management practices will not happen overnight, but several global banking entities offer international cash management services as interim solutions, according to HSBC. For example, these banks help their business clients to choose appropriate short term investments that allow them to quickly access cash when it’s needed but earn interest in the meantime.

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Differences in financial systems characteristically bring risk to companies that have limited experience managing cash beyond their national borders. However, a business manager who gains a thorough understanding of the financial markets in which their company operates can make the differences in international financial systems work to their advantage. These business professionals must remain flexible in their cash management practices because increasing globalization promises more integrated, standardized financial services throughout the world in the future. A key to their success is continued education about current policies as well as trends in international cash management.