Treasury Operations and Cash Management
What the domain tests
Treasury operations and cash management covers the daily mechanics that turn forecast cash into available liquidity: bank account structures, payment execution, balance reporting, reconciliation, and short-term forecasting. The exam tests whether you can position cash accurately, choose the right concentration tool, and spot control failures before they become losses.
Core rules and concepts
- Ledger versus available balance. The ledger balance is the bank's book entry; the available balance reflects holds, float, and value dating. Position on available funds, not ledger funds.
- Value date versus booking date. A payment booked today may value tomorrow. Funding decisions must use the value date because overdraft interest and cut-off times follow it.
- Payment rails. ACH/low-value batch, RTGS/high-value, cards, and real-time payments differ in finality, cut-off, reversibility, and data content. Irrevocable rails need pre-release controls.
- Concentration structures. Zero balance accounts sweep to a header; target balancing leaves a buffer; notional pooling offsets balances without physical transfer but may have legal and tax limits.
- Forecasting. Direct forecasting builds receipts and disbursements from counterparties and invoices; indirect forecasting derives cash from accounting flows. Measure forecast error by horizon.
Worked example
A group has three accounts: Operating A ledger $2,000,000 and available $1,850,000 because a $150,000 cheque deposit is on hold; Collection B ledger $600,000 and available $600,000; Payroll C ledger and available -$200,000. The group wants to invest surplus after funding C and leaving a $250,000 buffer on A. Available total = 1,850,000 + 600,000 - 200,000 = $2,250,000. After the buffer, investable = $2,000,000. Using ledger balances would overstate investable cash by $150,000 and risk a daylight overdraft.
Traps that cost marks
Confusing ledger and available balances; ignoring cut-off and value dates; treating notional pooling as a physical transfer; double-counting in-transit items; and presenting a forecast without stating horizon or variance. Controls questions often test segregation of duties and dual authorization, not just payment speed.