Understanding Treasury Management: Objectives, Functions, and Benefits

Treasury management is an important part of managing finances for business organizations. The ultimate goal of treasury management is simply to make sure that has all the required financial resources to its objectives and financial obligations.

WHAT IS TREASURY MANAGEMENT?

Treasury management is a system designed to optimize liquidity and identify and manage potential financial, operational and reputational risks. This means managing a company’s financial resources for the purpose of achieving its financial objectives.

OBJECTIVES OF TREASURY MANAGEMENT 

~Maintaining Liquidity

~Optimizing Cash Resources

~Establishing and Maintaining Access to Short-Term Financing

~Maintaining Access to Medium- and Long-Term Financing

~Maintaining Shareholder Relations

~Managing Risk

~Coordinating Financial Functions and Sharing Financial Information

WHAT ARE THE FUNCTIONS OF A TREASURY MANAGER?

A treasury manager is one who works in a treasury department with the ultimate goal of making the liquidity of a business. The treasurer must engage in considerable prudence to ensure that existing assets are safeguarded through the use of safe forms of investment and hedging activities.

However, to accomplish their goals, the treasury department and treasurers must engage in the following practices:

•Bank relations: Ensure to constantly keep the company’s bankers updated about its financial situation and also future expectations. Give them Information regarding any upcoming changes and discuss different banking services that the company uses like  lockboxes and wire transfers.

•Cash forecasting:  Compile information from around the company to create ongoing cash forecast. This information may come from the accounting records, the budget, capital

 budget, board minutes (for dividend payments) and even the

CEO (for expenditures related to acquisitions).

• Grant credit: Provide credit to customers which involves handling the guidelines that dictate the terms of credit offered.

•Fund raising: Identify situations when additional cash is needed, raise necessary funds through the acquisition of debt, selling stocks or implementing changes in company policies that impact the amount of working capital required to run the business.

•Risk management: Use various hedging and netting strategies to reduce risk related to changes in asset values, interest rates, and foreign currency holdings.

BENEFITS OF TREASURY MANAGEMENT 

Effectual treasury management will provide several potential benefits to business organizations.

It could help facilitate proper planning, better decision making, manage effective cash flow, reduce financial risks and ultimately increase efficiency while saving cost. 

While there are several benefits that’s accompany treasury management, there are also potential risks to watch out for. Some of them include :

•Volatile market conditions

•currency fluctuations 

•regulatory compliance

•cybersecurity risks

Overall, treasury management is a crucial part of financial management and its importance should not be understated. By following best practices and using appropriate tools and strategies, businesses can manage their financial resources effectively and achieve their financial objectives.