Understanding the Importance of Company Treasury Management

In discussing your company’s health, it is always important to know that your current standing will only be as good as your financial standing. A good financial standing doesn’t necessarily mean always having a lot of profit, it simply means your finances are taken care of, operations are not draining your funds, your investors are seeing a return of investment, and your operational expenses are below or at worst-case scenario, near your profit margins.  

So how do you make sure you have good financial standing at all costs? Through proper treasury management. 

Read: The Backbone of a Corporation: Strategic Financial Management  

 
 
What is a Treasury?

Going back to when you were in school, do you remember the role of your class treasurer? If you do, then you’ve got the basics of what a company treasury is.  

Your treasury contains all of your financial resources and the handling of your cash flow. It doesn’t mean you have your money in a vault in your office – it just means those in charge of your company’s finances and liquidity properly store it in your banks, investments and other assets in your financial portfolio.  

Managing this treasury is usually handled by a trustworthy team of finance and accounting professionals who help optimize the company’s liquidity and profitability and offers insights on cash management and investment management while specializing in corporate finance. All these help your company be on track with your finances, balancing the cash flow and helping you secure your longevity. 
 

Benefits of Proper Treasury Management 

Cash Management

Tasking your finance and accounting team to handle your treasury efficiently helps manage your company’s cash -flow. This means that your cash inflows and outflows are well-documented and validated to ensure that your books are in order.  

With proper cash management, your company will be able to track all transactions incoming and outgoing and create accurate financial reports and projections if needed. 

 
Liquidity Management 

While it is good for companies to diversify their assets whether it be through investments, multi-currency dealings and other ventures, having enough liquidity is essential in staying on top of your company’s obligations.  

Your treasury should always be liquid enough to comply with your operational requirements – able to pay your suppliers, company subscriptions for tools and resources as well as your people’s payroll. Good treasury management effectively eliminates liquidity issues, making sure your transactions go as planned.  

Corporate Finance 

Aside from managing the finances you already have; your treasury also indicates your corporate finance capabilities. Corporate finance is all about being able to manage the financial obligations of your dealings – whether it be the costs of expansion, mergers and/or acquisitions or even debt management and investment ventures., You can only begin these ventures if, in the first place, your treasury is already in order.  

Risk Mitigation 

Having a proper treasury management strategy protects your finances as well during times of crisis. It makes sure you are optimizing the company’s cash-flow so that your company’s lifeline does not rely on month-by-month profit or revenue. 
 
This gives your company wiggle room and security to navigate different risks, equipping the company with enough financial resources to implement different business continuity processes.  

Cash Optimization 

Surplus cash, if not managed properly, can lead to missed opportunities for earning returns. Treasury management focuses on investing excess funds wisely to generate additional income for the company. This not only enhances profitability but also ensures that the company’s funds are used efficiently. 

Trust Between Stakeholders

Proper treasury management results in your company having accurate financial records and financial projections at all times. Having these reports ready to hand or even proactively sending them out on a routine basis shows your stakeholders that you are responsible for all your company matters and dealings, increasing the trust between the partnerships.  

Proper company treasury management in a nutshell helps your company be ready for any and all financial obligations at all times.  

Taking care of your treasury requires transparency of costs and expenditures between all departments so that your accounting team uses accurate numbers in creating their reports and projections. In the end, you will not be caught short on liquid funds; your assets will always be taken care of, and your operational expenses will be properly budgeted and mitigated.  

Read Next: The Role of a Management Accountant in your Company's Success 

Need help in Improving your Company’s Financial Management? 

At D&V Philippines, we make sure your company’s finances are in order as we handle end-to-end accounting and auditing needs. With this, we offer scalable services that can align with your company’s unique needs. Contact us!   

You may read our whitepaper, Your Talent Sourcing Partner, to find out how D&V Philippines, a trusted finance and accounting outsourcing company has helped companies all over the world in leveraging their finances to achieve their goals.