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Efficient Commercial Treasury Management Requires a Diversified Approach

Efficient Commercial Treasury Management Requires a Diversified Approach

  • Agnallo Nampunda • Head of Treasury, FNB Mozambique

November 2022 – Saving is generally a disciplined practice aimed at achieving specific personal goals. But when it comes to the corporate environment, companies set multiple short, medium and long-term objectives with, invariably, the most important of these being the ability to generate and maintain a healthy cash flow to meet their most immediate operational needs and fund their long-term growth plans.

According to Agnallo Nampunda, Treasury Director at FNB Mozambique, this is a crucial distinction to be kept in mind by the business class, as the business model of cash management is, by its intrinsic nature, very different from individual savings habits.

“The differences between the various types of businesses make it impossible to adopt predetermined and, at the same time, flexible rules regarding the effective management of liquidity. However, these share a common goal: that of business profitability.”

Explains Agnallo that, “While businesses spare no effort to be profitable, they can take their success to higher levels through efficient cash/cash management by investing their cash reserves or surpluses in interest-bearing accounts until the funds are needed.”

Agnallo says achieving this optimal state of cash management requires managers to stay in tune with the current and future cash needs of their businesses. It then requires them to effectively combine a range of savings and investment solutions that serve their intended purpose, for a continuous and fluid movement of funds.

“The differences between the various types of businesses make it impossible to adopt predetermined yet flexible rules regarding effective liquidity management…”

This kind of diversified cash management approach using various solutions is, moreover, a relatively simple business discipline to put into practice and the resulting benefits for business sustainability are valuable.

While how to optimise liquidity may differ from business to business, Agnallo Nampunda says the fundamentals are fairly universal such as separating the day-to-day transactional account from the investment account helps businesses and individuals optimise returns and manage short and long-term treasury needs.

“Many of our successful business customers have subscribed to several liquidity management solutions simultaneously, from a transactional account for day-to-day operations to a money market, which is a combination of term deposits with long-term spending and investments in mind.”

“Considering the significant interest our clients earn, it is easy to see why many of them include savings accounts in their diversified approach to cash management, and the financial discipline they develop within the business is often even more valuable” he explains.

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By simply running a separate account for liquidity management and another account for day-to-day transactions, businesses can reduce the risk of being faced with unsustainable future expenses, such as VAT or salary payments, and may not have sufficient funds to cover them.

Agnallo clarifies that FNB provides its corporate clients with several affordable solutions that allow them to achieve this level of optimised cash management. “All of FNB’s ‘business savings’ accounts are savings instruments with no opening costs, which means that our clients can open as many accounts as they need to effectively manage their funds at no cost.

In addition, our customers can name their accounts as they prefer, thus clearly reserving each account for the purpose of long-term or short-term cash optimisation.

“We have proven time and again the positive effects that well-structured diversified cash management brings to our ‘corporate clients’.” He continues, “we work tirelessly to instil an understanding of the value that small, disciplined treasury management measures taken today can mean for the long-term growth and future sustainability of the business.”

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