Managing finances effectively for every business is downright vital for long-term success. While most people think of accounting as the sole function of a finance department, there is another critical area that keeps a company stable and prepared: treasury management.
This function is the engine that ensures a business has the right amount of cash at the right time to maximise financial opportunities while keeping potential risks at a minimal level. It is a crucial component of a company’s financial health, overseeing all cash flows and financial assets to maintain stability and support growth.
This piece of resource will briefly explain everything you need to know about treasury management.
What is a treasury management system?
Treasury management keeps businesses financially stable and prepared throughout the year. Treasury management is not the same as financial management, which we will dive into in more detail in the later part. Essentially, it is the process of overseeing incoming and outgoing cash and other financial resources like assets and liabilities.
Proper treasury management ensures the company has enough cash for its daily operations and investments with minimal to no risk. It is the financial muscle that allows businesses to stay cash-positive.
The process also plays an important role in financial planning, especially for large organisations wanting to maintain a healthy cash balance at all times.
Read more:Top Challenges Facing Corporate Treasurers Today
Why is treasury management important?
Treasury management is the backbone of the business’ financial health. Its strategic role is best explained through these key pillars.
1. Liquidity and cash management: Treasury management involves effective cash management practices, from collecting outstanding debts and managing supplier payments to optimising cash flows. The process’ goal is to make sure that not only does the business have enough cash to function, but also that it maximises all the available extra funds.
2. Working capital management: Treasury management also oversees the company’s working capital, or short-term assets and liabilities, ensuring it is capable of meeting the day-to-day expenses and debt obligations.
3. Risk management: Not only do treasurers need to know where their money is coming from, but they also need to protect themselves and the company from a plethora of risks, namely fraud, foreign exchange and interest rate fluctuations, changing regulatory requirements, and many more.
Read more:Is Your Hotel Ready for the Off-Season? The Treasury Answer
4. Investment/ portfolio management: Poor funding decisions can lead to disastrous results. Effective treasury management helps ensure leaders can make more informed decisions after weighing all possible risks and returns.
5. Compliance: Treasury management handles financial reporting and required documentation, providing management, stakeholders, investors, and regulatory bodies with transparent, accurate, and compliant reports.
Maintaining a complete visibility of the company’s cash and liquid assets is probably the most challenging aspect of treasury management. Its role is incredibly vital for multi-national enterprises as they have to constantly keep a close eye on not only the daily exchange rates but also the changing regulatory landscape at each locale.
As the importance of the treasury department grows, so does the need for a sophisticated solution to centralise all data into a single source of the truth, along with robust risk management tools to help keep threats under control.
Cash management vs. treasury management
Many processes in treasury management involve different forms of cash. However, don’t confuse treasury management with cash management. Though the two terms are related, they serve different purposes.
| Treasury management | Cash management |
|
|
Financial vs. Treasury Management
Many would also confuse treasury and financial management due to their overlapping responsibilities (concerning the company’s financial health and long-term growth).
Here are some key characteristics that make them different.
For a deeper dive into more differences between these two functions, check out this blog article.
| Treasury management | Financial management |
|
|
What is a treasury management system?
Suitable Treasury Management Systems (TMS) can help streamline and automate crucial core functions, enabling the treasury management department to run like a well-oiled machine.
But to meet changing market demands, reduce manual errors, and free up human resources, treasurers need to focus on solutions that cover the following areas.
Core features of a treasury management solution
Let’s break down the core features that make treasury management a must-have.
1. Cash flow forecasting: Help businesses with:
– Eliminating gut feelings when predicting future demands
– Forecasting future cash availability and needs at different points in time
– Identifying areas for potential cost optimisation
– Ensuring sufficient funds are allocated to the right functions
Additionally, many available solutions today can also integrate seamlessly with the company’s bank and the entire IT ecosystem to automatically calculate cash positions and consolidate data for further analysis.
2. Working capital management: Helps businesses streamline billing processes and maintain good terms with suppliers while developing detailed incentive policies to optimise reserves.
3. Payment automation: With built-in features like centralised account management, batch payments, transaction matching, fraud detection, and approval workflows to process payments automatically, thus reducing manual errors.
4. Risk management: Helps track and manage foreign exchange exposure and interest rates, perform risk and scenario analysis, create hedging strategies, monitor investment portfolios and more, enabling treasurers to stay proactive against any potential risks.
5. Reporting and analytics: Provides intuitive and visualised dashboards allowing treasurers to quickly grasp insights to understand trends and optimise resources. Many TMS also come with ready-built, compliant, and customisable templates to meet the business’ reporting needs.
Selecting a treasury management solution requires careful consideration of numerous factors. The ideal solution should balance functionality, usability, security, and cost while meeting your organisation’s specific needs. Consider both current requirements and future growth plans when making your decision.
Check out the complete list of all must-have features and functions in a treasury management solution that you need to take into consideration in this article.
4 factors to consider when selecting a treasury management solution
Selecting a TMS is a critical decision that can significantly impact your company’s financial efficiency and risk management. With many options currently available today, selecting the right one starts with understanding your needs and what issues you want the software to solve.
1. Define your goals: Before you start looking at software, you must first understand what you need it to do.
– What are your biggest treasury challenges?
– What are the “must-have” and “nice-to-have” features to solve those pain points?
– What is your plan for the future? Do you plan to expand internationally and need the software to support multi-currency?
2. Evaluate key features and functionality: Once you have a clear idea of your needs, you can evaluate how different systems meet them.
3. Consider deployment method and vendor: The choice of deployment model (cloud vs on-premise) and vendor is just as important as the features themselves. In addition to reputation and RPO, do carefully evaluate other criteria, such as support level, end-user training, and total cost of ownership.
4. Conduct a thorough vetting process: request a live demo using your own data to see how the system performs in a real-life scenario while evaluating its security and how it handles sensitive data. Also, don’t forget to involve your key stakeholders from treasury, finance, IT, and other relevant functions in the selection process. Their feedback on ease of use and practicality is invaluable for ensuring a high adoption rate.
Introducing CS Lucas Treasury Management Solution to the TRG Portfolio
We are thrilled to announce the addition of the CS Lucas Treasury Management System (TMS) to our financial solutions lineup. With its robust cash forecasting, payments, borrowing, and investment capabilities, this system is a natural fit alongside TRG International’s existing offerings, such as Infor SunSystems Cloud, Yooz, and Infor OS.
Why CS Lucas?
CS Lucas provides 360° visibility into financial operations, empowering treasurers to manage cash flow, risk, and investments in real-time. Key features include:
– Seamless integration: Works with ERP, legacy systems, and open banking platforms, ensuring minimal disruption during deployment.
– Enhanced decision-making: Real-time collaboration and reporting tools optimise financial planning.
– Error reduction: Pre-trade compliance alerts and a comprehensive activity log improve accuracy and fraud prevention.
What does this mean for our clients?
By integrating CS Lucas, TRG reaffirms our commitment to delivering cutting-edge solutions that streamline processes and drive financial innovation.
We aim to significantly enrich our solution portfolio to better serve our ever-expanding customer base with innovative business management solutions. We are committed to continuously enhancing our offerings to meet the evolving needs of businesses across different industries.
Interested in learning how CS Lucas, as well as TRG’s complete financial management suite, can elevate your business’ pain points? Schedule a call with us!
