Treasury Management: The Practitioner's Guide (Wiley Corporate F&A Series) »

STEVEN M. BRAGG, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and an auditor at Deloitte & Touche. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Mr. Bragg resides in Centennial, Colorado. He is also the author of Accounting Best Practices and Accounting Policies and Procedures Manual (both published by Wiley).

With a broad range of responsibilities in the modern corporation, ranging from cash management to the proper movement of potentially large amounts of funds and the construction of hedges, the treasurer's duties require the integration of a comprehensive set of controls into a broad-based pro-cedural framework.

Written by renowned accounting expert Steven Bragg, Treasury Management: The Practitioner's Guide shortens the treasurer's learning curve for all aspects of the position with authoritative coverage of the general categories of cash management, financing, risk management, and treasury systems.

Addressing the treasury function from every angle, this invaluable guide:

• Addresses the various methods by which a company transfers cash, both on paper and by electronic means



• Shows how to create a cash forecast and monitor its accuracy



• Covers several methods for aggregating cash from a multitude of locations



• Explores the components of working capital and how they may be altered, thereby impacting cash flow planning



• Looks at what the treasurer does to raise debt and equity, as well as how to invest funds



• Includes discussions of the various kinds of debt and key characteristics of each one, how to deal with credit rating agencies, and the intricacies of equity offerings



• Discusses investments including investment criteria, types of available investments, and investment and risk-reduction strategies



• Considers an increasingly important aspect of the treasurer's responsibilities: risk management



• Describes the technology that drives many treasury transactions

Filled with extensive supporting examples, Treasury Management: The Practitioner's Guide is the ideal sourcebook for the mechanics of how to run all aspects of the modern treasury department.

Preface ix

About the Author xi

Part 1 Cash Management 1

Chapter 1 Treasury Department 3

Role of the Treasury Department 3

Treasury Controls 6

Treasurer Job Description 7

Position of Treasury within the Corporate Structure 7

Treasury Centralization 8

Treasury Compensation 10

Bank Relations 10

Treasury Outsourcing 13

Summary 18

Chapter 2 Cash Transfer Methods 21

Check Payments 22

Wire Transfers 27

ACH Payments 28

Procurement Cards 31

Cash Payments 32

Fees for Cash Transfers 32

Summary of Cash Transfer Methods 32

Cash Transfer Controls 34

Cash Transfer Procedures 43

Summary 48

Chapter 3 Cash Forecasting 49

Cash Forecasting Model 49

Information Sources for the Cash Forecast 53

Measuring Cash Forecast Accuracy 54

Cash Forecasting Automation 55

Bullwhip Effect 57

Business Cycle Forecasting 58

Cash Forecasting Controls 60

Cash Forecasting Policies 62

Cash Forecasting Procedure 62

Summary 62

Chapter 4 Cash Concentration 67

Benefits of Cash Concentration 67

Cash Concentration Strategies 69

Pooling Concepts 70

Physical Sweeping 70

Notional Pooling 73

Comparison of Account Sweeping and Notional Pooling 74

Nonpooling Situations 75

Bank Overlay Structure 75

Cash Concentration Controls 76

Cash Concentration Policies 78

Cash Concentration Procedures 79

Summary 81

Chapter 5 Working Capital Management 83

Working Capital Variability 83

Cash Management 85

Credit Management 85

Receivables Management 87

Inventory Management 88

Working Capital Metrics 95

Summary 102

Part 2 Financing 103

Chapter 6 Debt Management 105

Types of Debt 105

Credit-Rating Agencies 116

Accounting for Debt 118

Debt-Related Controls 130

Debt-Related Policies 134

Debt-Related Procedures 135

Summary 136

Chapter 7 Equity Management 141

Stock Registration 141

Exemptions from Stock Registration 147

Accounting for Stock Sales 150

Equity-Related Controls 152

Equity-Related Policies 154

Equity-Related Procedures 156

Summary 163

Chapter 8 Investment Management 165

Investment Criteria 165

Investment Options 166

Investment Strategies 169

Outsourced Investment Management 172

Risk-Reduction Strategies 173

Accounting for Investments 174

Investment Journal Entries 182

Investment Reporting 188

Investment Management Controls 188

Investment Management Policies 191

Investment Management Procedures 195

Summary 199

Part 3 Risk Management 205

Chapter 9 Foreign Exchange Risk Management 207

Foreign Exchange Quote Terminology 207

The Nature of Foreign Exchange Risk 208

Data Collection for Foreign Exchange Risk Management 209

Foreign Exchange Hedging Strategies 210

Hedge Accounting 223

Foreign Exchange Hedge Controls 232

Foreign Exchange Hedge Policies 234

Record Keeping for Foreign Exchange Hedging Activities 235

Foreign Exchange Hedge Procedures 236

Summary 238

Chapter 10 Interest Risk Management 239

Interest Risk Management Objectives 239

Interest Risk Management Strategies 240

Accounting for Interest Risk Management Activities 253

Interest Risk Management Policies 266

Record Keeping for Interest Rate Risk Management 267

Interest Risk Management Procedures 267

Summary 267

Part 4 Treasury Systems 271

Chapter 11 Clearing and Settlement Systems 273

Characteristics of Clearing and Settlement Systems 273

Overview of the Clearing and Settlement Process 273

Fedwire 275

Automated Clearing House (ACH) System 275

Clearing House Interbank Payments System (CHIPS) 277

Check Clearing 278

The Continuous Link Settlement (CLS) System 280

Summary 281

Chapter 12 Treasury Systems 283

Treasurer's Technology Needs 283

Treasury Management System 285

SWIFT Connectivity 287

Summary 288

Index 289