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Treasury Management
is the management of all financial affairs of the business such as raising funds for the business from various sources, currency management, cash flows and various strategies and procedures of corporate finance.
Treasury Management
is the act of managing a company’s daily cash flows and larger-scale decisions when it comes to finances.
Treasury Management
It can provide governance over a company's liquidity, establish and maintain credit lines, optimize investment returns, and strategize the best use of funds
Treasury Management
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.
Treasury Management
is a part of Financial Management which is concerned with the management of firms cash and funds
Treasury Management
Implementation of Financial plan
Treasury Management
Focus on preparation and presentation of financial statements
Treasury Management
Short Term Strategy
Financial Management
refers to the managerial activity, firms financial resources to achieve the overall aim of the enterprise.
Financial Management
Formulates, coordinate and administers financial plan for controlling operations
Financial Management
Focus on Periodic examination of income and expense budgets
Financial Management
Long Term Strategy
Cash Management
Liquidity Management
Availability of Funds
Deployment of Funds
Optimum Utilization of Resources
Risk Management
Function of Treasury Management
Cash Management
(Function of Treasury Management)
refers to the process of collecting and managing cash flows
Cash Management
(Function of Treasury Management)
It ensures that there are an effective collection and payment system in the organization
Liquidity Management
(Function of Treasury Management)
gives a clear indication of financial health, and it provides visibility into how well a company can afford its current and future debts, short-term investments, obligations, and spend with its liquid cash and assets at hand.
Availability of Funds
(Function of Treasury Management)
Treasury manager has to ensure that the funds are available with the organization in sufficient quantity, i.e. neither be more nor less, to fulfil the day to day cash requirement for the smooth functioning of the enterprise.
Deployment of Funds
(Function of Treasury Management)
The___ must be done in tight quantity such as the acquisition of fixed assets, the purchase of raw materials, rent, salary, bills, interest, and others
Optimum Utilization of Resources
(Function of Treasury Management)
ensuring that firm resources are used effectively in order to reduce operating costs and avoid future liquidity shortages
Risk Management
(Function of Treasury Management)
is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions
collection management
Liquidity optimization
Information sharing
risk hedging
why is treasury management important?
liquidity optimization
why is treasury management important?
Monitor timing of cash inflows and outflows.
collection management
why is treasury management important?
Set the right policies for accounts payable and receivables.
risk hedging
why is treasury management important?
Decrease financial risk.
information sharing
why is treasury management important?
Obtain real time data around current financial status.
Reduce risk
enhanced decision-making
improved cash flow
increased profitability
increased efficiency and cost savings
Key benefits of Treasury management
improved cash flow
Treasury management can help improve an organization's cash flow by making sure that funds are being used efficiently and that short-term obligations are being met.
reduced risk
Treasury management can also help you reduce risk by carefully managing an organization's exposure to foreign exchange and interest rate risks.
increased profitability
By reducing risk and improving cash flow, treasury management can help increase an organization's profitability.
enhanced decision-making
Treasury management provides accurate and up-to-date information about an organization's financial resources, which can help decisionmakers make better choices about how to allocate those resources.
increased efficiency and cost savings
When treasury management is done well, many manual processes are automated and less error-prone. As a result, you can significantly increase efficiency and save on costs.
Predict future cash position
Increase business agility
Minimize liquidity risk
Attract additional financing
Capture the financial health of the company
Objectives of Liquidity Management
Minimize liquidity risk
One of the main objectives of liquidity management for every company should be to minimize the risk of having a shortage of liquid assets to pay creditors. In other words, maintaining cash positions that allow you to meet your daily obligations. Minimizing liquidity risk helps you to avoid any insolvency issues.
Capture the financial health of the company
Even though there are a variety of metrics to capture the financial health of a company, liquidity measurements should remain the primary indicators. Liquidity analyses provide good insight into how well a company is able to pay its creditors in a timely and orderly fashion.
Predict future cash positions
Accurate liquidity management should aim to provide insights into the past, current, and future financial conditions and cash positions. When it becomes clear how much cash you have at hand now and in the future, it helps your team make informed and quick strategic decisions.
Increase business agility
When you know that your company is financially healthy when it becomes easier to speed up bigger strategic decisions because you know where your business is standing and what is financially feasible. This way, you can capitalize on market trends faster or take other strategic decisions promptly to grow your business further.
Attract additional financing
By lowering your liquidity risk, it becomes easier to attract additional financing with good terms and conditions as your bargaining power will become stronger
Treasury department
department that is responsible for a company ’ s liquidity
Treasury department
Department must also safeguard existing assets, which calls for the prudent investment of funds, while guarding against excessive losses on interest rates and foreign exchange positions.
Bank relationship
Cash forecasting
Cash management
Credit rating agency relations
Credit granting
Fund raising
Investment management
Management advice
Treasury risk management
Working capital management
Other activities
Role of treasury department
treasurer
must monitor current and projected cash flows and special funding needs, and use this information to correctly invest excess funds, as well as be prepared for additional borrowings or capital raises.
treasurer
needs to monitor the internal processes and decisions that cause changes in working capital and profitability, while also maintaining key relationships with investors and lenders.
Cash forecasting
is the process of estimating company’s future cash flow in order to make informed decisions about treasury management.
Cash forecasting
involves projecting both incoming and outgoing cash flows which can then be used to assess the short-term and long-term financial health of a business, as well as to identify potential cash flow problems.
Cash forecasting
treasury staff needs to compile this information from all subsidiaries into short-range and long-range cash forecasts.
Cash forecasting
is also needed at the individual currency level, which the treasury staff uses to plan its hedging operations.
Working capital management
The treasury staff should be aware of working capital levels and trends and advise management on the impact of proposed policy changes on working capital levels.
Working capital management
The process of ensuring a company is using its financial resources in the most effective way possible.
Working capital
The difference between a company's current assets and its current liabilities. It's a measure of a company's operational efficiency and short term financial health.
Cash management
The treasury staff uses the information it obtained from its cash forecasting and working capital management activities to ensure that sufficient cash is available for operational needs.
Investment management
The treasury staff is responsible for the proper investment of excess funds. The maximum return on investment of these funds is rarely the primary goal.
Treasury risk management
The treasury staff can create risk management strategies and implement hedging tactics to mitigate the company’s risk.
Management advice
The treasury staff monitors market conditions constantly, and therefore is an excellent in - house resource for the management team should they want to know about interest rates that the company is likely to pay on new debt offerings, the availability of debt, and probable terms that equity investors will want in exchange for their investment in the company.
Credit rating agency relations
The treasury staff responds to information requests from the credit agency’s review team and provides it with additional information over time.
Bank relationships
The treasurer meets with the representatives of any bank that the company uses to discuss the company ’s financial condition, the bank ’s fee structure, any debt granted to the company by the bank, and other services such as foreign exchange transactions, hedges, wire transfers, custodial services, cash pooling, and so forth.
Fund raising
The key function is for the treasurer to maintain excellent relations with the investment community for fund - raising purposes.
While all funds ultimately come from the buy side, the sell side is invaluable for its contacts with the buy side, and therefore is frequently worth the cost of its substantial fees associated with fund raising.
Credit granting
The granting of credit to customers can lie within the purview of the treasury department or may be handed off to the accounting staff. This task is useful for the treasury staff to manage, since it allows the treasurer some control over the amount of working capital locked up in accounts receivable.
Other activities
If a company engages in mergers and acquisitions on a regular basis, then the treasury staff should have expertise in integrating the treasury systems of acquirees into those of the company.
Another activity is the maintenance of all types of insurance on behalf of the company
Mergers
Two business of similar size and scale of operations combine into one new company
Acquisitions
One business buys another, often smaller, business
