Apple has also finally decided to part with some of the approx. USD100B worth of cash to its shareholders as dividends. In a big departure from Steve Jobs' days at Apple, its handpicked successor - Tim Cook has convinced the board that Apple can afford to part with few of its Billions on a regular basis even if that means it cannot use its overseas cash.
Even with this dividend, the challenge for Apple still remains with what to do with the hoard of cash it keeps piling up. Several analysts are suggesting that at its current rate of growth, Apple will still be adding some USD35B to the balance of liquid assets it held in 2011, with two thirds of the cash earned and held overseas (to avoid hefty US taxes on foreign earning repatriation of 35%). This has created an artificial divide between U.S. and foreign holdings – a divide that cannot be easily ignored.
When there is so much cash floating around multinational organisations such as Apple, Microsoft, CISCO, a strong central treasury backed by an efficient cash management policy and an integrated specialised workflow driven Treasury Management System is mandatory to track and manage liquidity across the organisation on a day to day basis.
Treasury is very much centralised at Apple. They have three regional centres in Singapore, Ireland and Cupertino, CA reporting to central Treasury. The locations have been chosen to ensure they are close to the major business units and the shared service centres that are crucial and sensitive to the local cash and banking needs.
approval system that sits on top of the Treasury System that manages any banking related authority including signatures and location. A good treasury policy dictates that treasury is fully responsible for not only the cash but the usage of it across the various business entities as well as the bank accounts.
Apple has consolidated its massive cash pile into over 200 bank accounts across multiple banks to help them monitor where the cash is, who has access to it and what it is earning. This allows a sharper operational focus and quicker decision making leading to an optimised financial value chain throughout the enterprise.
Application of a centralised Treasury Management System (TMS) for a cash rich company such as Apple is crucial in that it provides for on-demand information from a central source of truth to the treasury money managers to make superior investment decisions well ahead of time. They would not want their gigantic cash pile to be sitting in bank accounts earning simple interest rates while it can earn better rates by investing higher yielding structures such as fixed income money markets. An indirect benefit is the reduction of fraudulent access to cash since when invested in money market funds or in commercial paper, it becomes less accessible than cash sitting in a bank account.
Warehousing of such piles of cash in different jurisdiction for tax purposes also necessitates constant review in relation to ever changing local laws and investment risks while maintaining full compliance with local reporting obligations. Such reviews will require a complete financial history including quick on demand access to information regarding bank account balances (worldwide) and cash by region as well as legal entity to minimise compliance risk. Data mining through the TMS also allows for better terms to be negotiated with the banks and money brokers.
A simple rule of thumb calculation shows that the treasury of a cash rich company can still add greater value by reducing the percentage of idle cash through streamlining of accounts and allowing money managers to focus on cash conversion metrics to further unlock the free cash from the firm’s financial value chain.
Let's admit it, we'd all like to have APPLE's cash overflow problems, but it's still a problem that can't be ignored anymore than a company who is less abundant with cash.