Treasury management is an umbrella term which encompasses functions such as cash flow management, liquidity management, 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 operational, financial, reputational risk of a business. Treasury management role focuses on the planning, managing cash requirements of a business, manages liquidity by ensuring that company Is able to fulfill its financial obligation when it becomes due for payment and manages 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 a rapid growth. Due to this treasury management especially for MSME’s and startups becomes very crucial.
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 a 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.
Due to 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 company’s cash needs.
Treasury management task is to maximise returns on the funds available in a company by making investments which have higher returns and low risk.
