What is Treasury Management?

What is Treasury Management?
April 16, 2022

What is Treasury Management?

Treasury management is an umbrella term that encompasses functions such as cash flow management, liquidity management, and treasury risk management. It basically means that business should always have the cash required to operate and is also using surplus funds efficiently. 

Treasury management helps to reduce the operational, financial, and reputational risk of a business. The Treasury management role focuses on the planning, managing cash requirements of a business managing liquidity by ensuring that the company Is able to fulfill its financial obligation when it becomes due for payment, and managing risk. 

There are many small firms and startups in India that don’t have a formal treasury department. This task is usually taken up by the operational offshoots such as accounting or payroll teams. This results in less effectiveness. They do require effective treasury management for rapid growth. Due to this treasury management especially for MSMEs and startups becomes very crucial.

Key Benefits of Treasury Management

Treasury management can help to preserve and protect a company’s capital for a high-growth startup. For companies, it is difficult to plan out the expenses in advance. Many times there might be instances where the companies require immediate cash attention to an unexpected expense. So liquid investments must be a top priority for businesses. 

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Due to the liquidity aspect, businesses and startups prefer bank current account which has high liquidity but do not provide any return. Treasury management strengthens and protects the ability of the company to grow. Every company should adopt a treasury lens which can help in evaluating how much risk a company can take and can choose an investment that fits well with the company’s cash needs.

The Treasury management’s task is to maximize returns on the funds available in a company by making investments that have higher returns and low risk.