Since Charles Brown became the CFO of Office Depot Inc. two years ago, he was an executive on a mission. His goal: to eliminate the company's half-billion dollars in debt and replenish its empty cash coffers. "When I came in with a new management team, the only cash was in daily operations," he recalls. "We determined that having liquidity is the lifeblood of a company, and so we initiated a program called Improved Capital Discipline." Under that program the company quickly moved into a positive cash position, and by the first quarter of this year, Office Depot, with sales of $13 billion, had $1 billion in cash on its balance sheet. Instead of worrying about making the payments on its debt, Brown can now worry about how best to use all that cash. "It's a high-class problem to have," he laughs.

In its struggle to increase cash, Office Depot was far from alone, and indeed, Brown's high-class concern about where to put the company's newfound liquidity to get decent returns has been putting treasurers to the test. Having been charged with increasing cash on hand, they also face short-term investment possibilities that offer very low returns. "Before you can maximize your return on cash," says Dorothy Rule, director of global products management, liquidity and investment at Citigroup, "the first thing you have to know is what cash you have to work with."

That's not always easy. According to Citigroup's Rule, the challenge isn't "strategic cash"–the funds that are used for strategic investments–but working capital. In many cases, treasurers do not have in place adequate systems to calculate their working capital requirements. With inefficiencies there, treasurers may find themselves keeping a higher level of ready cash available than the company actually needs. That translates into lost investment opportunities on slightly longer-term investments.

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