Treasury Management, What does a Treasury Manager Do?
The management of a company's daily cash flows and larger-scale financial decisions is known as treasury management. It can control a company's liquidity, set up and keep credit lines, maximize investment returns, and plan the best way to spend money. As a company raises, earns, or uses cash, treasurers or senior financial officers ensure that there is working capital to maintain operations and reduce financial risks. Overall Goal of Treasury Management
The primary goal of treasury management is to effectively and efficiently manage an organization’s cash and related financial assets (and liabilities) to support the achievement of the organization’s business objectives and strategy. This objective is crucial because, regardless of their success, all businesses have a limited supply of liquid assets at any given time.
What Does a Treasury Manager Do?
A Treasury Manager is responsible for overseeing an organization’s daily and strategic financial operations related to cash flow, liquidity, investment planning, and financial risk management. Their role is central to maintaining the company’s financial health by ensuring sufficient cash availability, optimizing banking operations, and aligning short-term assets and liabilities with corporate financial goals.
They work closely with finance leadership to develop cash forecasting models, manage credit facilities, oversee debt portfolios, and assess financial risk exposure. Treasury Managers also collaborate with internal departments and external banking partners to execute efficient and secure treasury transactions. This role requires a combination of analytical expertise, technical proficiency, and attention to detail.
The major objectives of treasury management include the following:
• Ensure Liquidity
• Make the most of cash resources
• Manage Risk
• Keep Having Access to Financing for the Short Term
• Manage Investments
• Maintain Access to Medium and Long-term Financing
• Manage Technology and Information
• Collaborate with Other Departments
• Control Third Parties How Important Treasury Management Is Companies also use treasury management to reduce potential risks in the future in addition to managing funds. Risks typically take the form of operational, financial, or reputational ones. For instance, owners of businesses are unable to anticipate natural disasters, global pandemics, or any other issues that might cause a disruption to their operations. Treasury management can take steps to cushion the financial blow of unexpected losses, how to bolster their internal processes and how to share the information with customers or partners. In general, treasurers serve as businesses' financial advisors. They analyze the industry's economic situation and offer guidance to management on how to deal with potential shifts. Relationships between banks are heavily influenced by Treasury management. These key relationships require ongoing reliance and transparency. A trusted advisor will help a company find the value in data to capitalize on opportunities that may not otherwise be known to them. Additionally, treasurers manage foreign exchange risk in order to identify any underlying exposure. What is the Process of Treasury Management? Let’s say that a startup called MyPieDoe plans to build and launch a new product and the treasury team needs an investment of $5 million for the project. They are responsible for deciding how to divide the funds, as well as whether the initial investment will be made through capital raising or using bank loans. MyPieDoe launches the product and makes a profit after securing funding. The incoming cash is managed and optimized by the treasury team for use within the company. The process of treasury management ensures that the business does not incur unwanted debt by either repaying the initial loan of $5 million or preparing for potential liabilities and financial risks. The requirement for real-time visibility so that treasurers can monitor when and how cash moves through various bank accounts is an essential part of treasury management. When budgeting to repay the initial investment, MyPieDoe's treasury team must forecast future risks or shortages. The team cannot accurately anticipate these future cash requirements if it does not have immediate visibility into its cash flow.
How Cash Management Relates to Treasury Management
A component of treasury management is cash management. It is the process of monitoring daily cash flow to ensure adequate working capital access. If there’s a risk of cash depletion, comprehensive cash management can make it easier to balance cash flow and replenish funds.
They might also get money from venture capital, loans from banks, or smart investments.