Treasury management is the process of managing an organization’s financial resources. It can help companies improve cash flow and reduce risk.
A treasurer’s responsibilities are diverse, including foreign exchange, cash management and regulatory compliance.
Corporate treasury managers must undertake cash forecasting and modeling to understand future cash inflows and outflows. This information feeds into critical decisions about funding, investments and risk management.
Cash management is a key discipline within Corporate Treasury Management that monitors and ensures the proper flow of incoming and outgoing cash. Its goals are to help businesses stay solvent and meet their needs while also making smarter investments for future growth.
Cash flow management is a complex process that requires specialised skills and resources. It also involves assessing risks and operating control around them.
The primary goal of cash management is to ensure that the company has enough funds available for its current obligations and to determine how much it should provide for contingencies. It is a time-consuming and complicated task.
The risk involved in cash management can be mitigated by using a tool that takes what the books say about payment terms and gives real-time visibility into how those payments are scheduled to come into the account. This helps treasury teams to plan cash flows and reduce their risk of fraud. It also helps to manage the seasonality of payment flows that can vary from country to country.
Liquidity management is the ability of a company to access readily available cash in order to fund short-term investments, cover debts, and pay for goods and services. It involves finance and treasury managers’ ability to look at the company’s balance sheet and convert funds that are tied up in longer-term projects into cash that is available for immediate use by the firm in its day-to-day operations.
During the global financial crisis, liquidity management strategies were crucial to a company’s survival as credit markets dried up and internal savings became a critical source of capital. During the pandemic’s early months, for example, companies stockpiled cash by rolling longer-duration investments into safer, more liquid vehicles such as government money-market funds (MMFs).
Treasury teams need to manage their liquidity in a centralized and efficient manner to get full visibility on their liquidity position. This can be challenging for corporate treasury and finance teams, as they have to pull data from multiple source systems and processes.
Corporate Treasury Management is a vital part of any business, large or small. It involves managing the organization’s cash and debt, as well as helping to develop its long-term financial strategy.
The function also includes dealing with financial risks such as interest rate and commodity risk, which may impact the firm’s ability to fund future capital investments or pension liabilities. Treasurers often use derivatives and other hedging tools to mitigate these risk factors.
Businesses typically seek help with their treasury management needs from their bank. Most banks offer a variety of services to meet the specific needs of their clients.
For example, they might provide mobile and business online banking and payment solutions to help simplify cash flow and manage receivables, payables and fraud detection. They might also offer treasury software and treasury management services, which encompass an assortment of processes that manage a business’s finances with the aim of improving efficiency and mitigating financial risks.
Within Corporate Treasury Management, Investment Management focuses on the management of assets and investments. This includes everything from coming up with a portfolio strategy to handling things like bookkeeping and budgeting.
Assets include stocks, bonds and commodities. Investment managers use these to build a portfolio of investments that meet a client’s needs and risk tolerance.
Professional investment managers handle money for clients, which could include pension funds or other institutions such as insurance companies and governments. They also help individual investors with their financial planning and savings goals.
Some managers may also specialize in particular styles of investment, including core / relative value and global growth investing. These strategies focus on identifying undervalued securities by researching them using data such as price-to-earnings ratios or flow of funds statistics.