Glosario

A campaign period is the specific operational timeframe during which product or service prices remain fixed based on predetermined budget rates, regardless of subsequent foreign exchange rate movements. Campaign periods exist within the broader budget period framework, with multiple campaigns typically occurring during a single budget cycle.

For example, an annual budget period might encompass quarterly or semi-annual campaign periods. During each campaign, companies cannot adjust their pricing to customers, creating foreign exchange exposure that requires systematic hedging protection. At the end of each campaign period, businesses can implement repricing to reflect accumulated currency impacts (known as the "FX cliff") before commencing the next campaign within the same budget period.

Cash collection is the treasury process by which a company recovers funds owed by customers or counterparties following the issuance of an invoice — with the core objective of ensuring invoices are settled on time and in full.

Why it matters

Effective cash collection is fundamental to a company's working capital health. When invoices go unpaid past their due date, cash that should be available to fund operations, investments, or hedging activity remains trapped in receivables. For finance teams, this creates a compounding challenge: not only does liquidity suffer, but the risk of debts turning doubtful or irrecoverable grows with each passing day. Getting cash collection right is therefore not merely an administrative task — it is a core discipline of treasury management.

How the process works

The cash collection cycle typically begins the moment an invoice is issued to a buyer, whether a B2B customer or a distributor. The process spans several stages: communicating payment terms, monitoring due dates, following up on overdue invoices, managing new settlement arrangements where necessary, and reconciling received payments against open items in the accounts receivable ledger.

For companies with high transaction volumes — for example, those operating across multiple markets or currencies — manual management of this cycle quickly becomes unwieldy. Human error in reconciliation, delays in identifying overdue accounts, and the administrative burden of chasing payments across time zones all erode efficiency. This is why software-based automation is increasingly central to modern cash collection practice.

The FX dimension

For businesses that invoice customers in foreign currencies, cash collection carries an additional layer of complexity: currency risk. When a company issues an invoice in euros, dollars, or any other currency that differs from its functional currency, the value of that receivable in home-currency terms fluctuates between invoice date and settlement date. The longer the collection cycle, the greater the potential for exchange rate movements to erode the margin the company originally priced into that transaction.

This is the intersection where treasury and FX management converge. Automating the handling of foreign currency collections — matching incoming payments to the correct hedges, converting proceeds at pre-agreed rates, and reconciling everything without manual intervention — is precisely where Currency Management Automation adds tangible value.

Kantox's Payments & Collections solution is designed to automate incoming and outgoing FX payments, mitigating the manual effort traditionally associated with multi-currency reconciliation. For companies looking to manage the broader exposure that arises from foreign currency receivables, understanding how collections integrate with a hedging programme is equally important — explored in detail in the use case on reducing long-term cash flow variability.

Cash Concentration is a corporate treasury management technique involving the transfer of all funds from different accounts to a single, centralised account to increase cash management efficiency and reduce fees. There are numerous advantages to concentrating all available funds into a single account. Businesses can improve the visibility and availability of their funds and gain more control over deposits from diverse locations while ensuring that no funds are lying in bank accounts that don’t generate interest. Cash concentration also reduces bank service charges to those of the central account and makes it simpler to monitor cash flows.

Cash Flow at Risk (CFaR), in the context of foreign exchange, is a measure of the extent to which future cash flows and operating profit margins may fall short of expectations as a result of currency fluctuations. CFaR calculations take into account the volatility of the currency pairs in the exposure and their correlation, in order to measure the cash-flow and/or operating margin impact of an adverse change in currency rates.

Cash flow hedging is a risk management strategy that protects a company's anticipated future foreign currency cash flows — such as expected export revenues or import payments — against adverse movements in exchange rates.

Unlike balance sheet hedging, which addresses currency exposures that have already been recognised in the accounts, cash flow hedging is forward-looking. It targets forecast transactions: sales or purchases that are highly probable but have not yet been invoiced or settled. The goal is to lock in a known exchange rate (or a protected range) for those future cash flows, so that FX volatility does not erode margins or destabilise operating budgets.

How it works

A company with significant foreign currency revenues or costs faces a simple problem: by the time money actually moves, the rate may have shifted materially from the rate assumed when pricing goods, setting budgets, or signing contracts. Cash flow hedging addresses this by entering into a financial instrument — typically a forward contract, FX option, or a combination of both — that offsets potential losses on the underlying exposure.

Under both IFRS 9 and US GAAP (ASC 815), a cash flow hedge can qualify for special hedge accounting treatment. This means the effective portion of the gain or loss on the hedging instrument is initially recognised in Other Comprehensive Income (OCI), rather than flowing immediately through the income statement. It is only recycled into profit or loss when the hedged transaction actually affects earnings — keeping the P&L aligned with the underlying commercial activity and reducing artificial volatility in reported results.

Why it matters for corporate treasurers

For businesses with recurring cross-border revenues or supply chains, cash flow hedging is often the primary tool for defending the budget rate — the internal exchange rate used to set prices, approve projects, and commit to margin targets. Without it, a sharp currency move between budget-setting and settlement can wipe out profit margins that took months of commercial effort to build.

Effective cash flow hedging requires three things to work in concert: accurate forecasting of future FX exposures, a disciplined hedging policy, and the operational ability to execute and manage hedges across the full transaction lifecycle. This is where automation plays a critical role. Manual processes struggle to keep pace with the volume, granularity, and speed required to hedge at the level of individual transactions — leaving companies either over-hedged, under-hedged, or exposed to costly errors.

Kantox's Dynamic Hedging® solution automates the entire cash flow hedging workflow — from exposure capture to hedge execution — enabling finance teams to hedge at the transaction level in real time, with full auditability and without manual intervention. For companies that also need to align their hedging with IFRS 9 or ASC 815 reporting requirements, the Hedge Accounting Module provides the documentation and effectiveness testing needed to qualify hedges for OCI treatment.

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Cash management is concerned with selecting the optimal combination of current assets —cash, marketable securities, accounts receivable and inventory — and current liabilities, or short-term funds to finance those current assets. For companies with international operations, cash management must take into account the impact of currency fluctuations.  

Cash management can be organised on a decentralise basis with autonomous operating units, or by means of a fully centralised cash management program. Decentralising allows the corporation to operate with a smaller amount of cash and allows it to reduce FX transaction costs by increasing the volume of FX transactions. It can also lead to cost-saving in terms of payments netting.

For big firms with subsidiares located around the world, centralising treasury operations has certain cash benefits. In practice, this means having the Head Office/ Headquarters (HQ) take responsibility for the liquidity needs of affiliates/subsidiaries. FX centralisation solutions like Kantox In-House FX allow group treasurers to obtain full visibility of cash flow FX exposures across the enterprise, whatever their source.

Cash pooling is a centralised cash management technique where a company or group of companies consolidates their cash balances into a centralised account. This practice optimises liquidity management by effectively combining surplus funds from some accounts with deficit balances in others.

By maintaining a single master balance with each banking partner, organisations can minimise interest expenses, reduce transaction costs, maximise interest earnings, and improve overall financial visibility. Cash pooling enables more efficient capital allocation, enhanced forecasting capabilities, and stronger negotiating power with financial institutions.

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A central bank is a government-sponsored entity entrusted with the issuance and management of a country's currency. In the case of the Eurozone, the central bank is a pluri-national entity. Because they have a monopoly on the issuance of banks and notes, central banks can exercise a decisive influence on short-term money market interest rates—and, by extension, on foreign exchange rates. The credibility of a central bank depends not only on the technical expertise of its management but also, crucially, on whether it has operational independence from the government. An important feature of central banks in recent years is the (somewhat informal) network of mutual currency swap agreements that allow participants to draw on a credit line from another central bank in a different currency than its own. These networks play an important role in stabilising global FX markets in times of heightened currency volatility. Currency swap agreements are mostly centered around the United States’s Federal Reserve Bank and the European Central Banks, but they also involve —increasingly— the People’s Republic Bank of China.

Clearing (the clearing of payments) is the process by which an intermediary entity acts to ensure a transaction is carried out, from the initial agreement between the two counterparties to the actual transfer of money from one bank account to another. The intermediary entity effectively adopts the role of both counterparties to carry out the transaction.In currency transactions, a bank, broker or FX provider completes the clearing process through a clearing department. Clearing speeds up the transactional delay between parties. Counterparties make payments directly to the clearing entity rather than the counterparty at the opposite end of the transaction.International clearing houses include: Clearing House Automated Payment System (CHAPS) in the UK, EBA Clearing in the Eurozone and Automated Clearing House in the United States.

A closed forward contract is a contractual agreement to buy or sell a specified amount of one currency against payment in another currency at a specified date in the future known as the ‘value date’. By contrast, when both parties can exchange the funds before the value date, the forward contract is said to be ‘open’. Sometimes known as a ‘fixed’ or ‘standard’ contract, the “closed outright forward” is the simplest type of forward contract. For this reason, they are widely used by businesses to hedge against the risk of losses due to adverse exchange rate movements. However, hedging with closed outright forwards makes it impossible to benefit from advantageous exchange rate movements. Closed outright forwards also offer no flexibility about the date of settlement. Both parties are legally obliged to exchange the funds on the value date. Businesses that need more flexibility over payment terms may prefer open or “flexible” forward contracts.

Close-out netting is a netting method that reduces pre-settlement credit risk. It only applies to transactions between parties where there is a default.Advantages of close-out nettingIn close-out netting, the non-defaulting company is no longer subject to contractual obligations to a defaulting counterparty. The positive and negative values are then combined into either a net receivable or payable. As a result, credit exposure is reduced from gross to net exposure.If the combined values result in a net receivable, the non-defaulting party owns this debt, which is to be paid by the defaulting party. If the netting calculation results in a net payable; the defaulting party is owed this amount by the non-defaulting party.Close-out netting is designed to considerably reduce the impact of a transactional default. Without close-out netting, the non-defaulting party remains bound by the terms of the transaction contract, and has to pay the notional amount. It is then often complicated, expensive and time-consuming to recover the capital. And if the defaulting party has cash flow problems or declares bankruptcy, the chances of recovering the total amount are greatly reduced.