The management of a company's financial assets, liabilities, cash flows, and financial risks to ensure liquidity, optimize returns, and minimize risk exposure.
Treasury Management (or Corporate Treasury) handles the financial backbone of an organization. Key functions include: Cash Management (forecasting cash flows, optimizing bank balances, managing collections and disbursements), Liquidity Management (ensuring sufficient funds for operations, maintaining credit facilities), Investment Management (deploying surplus cash into money market instruments, FDs, mutual funds), Debt Management (managing loans, bonds, repayment schedules, interest rate risk), Foreign Exchange Management (hedging currency exposure, managing international payments), Risk Management (interest rate risk, credit risk, counterparty risk), and Bank Relationship Management (negotiating rates, maintaining multiple banking relationships). In India, treasury operations must comply with FEMA for forex transactions and RBI guidelines for investments. Large companies have dedicated treasury departments; SMBs typically handle this through the CFO or finance manager.
A mid-size exporter's treasury dashboard: Cash position: ₹2.5 crore across 3 banks. Receivables (30 days): ₹4.2 crore. Payables (30 days): ₹3.1 crore. Short-term investments: ₹1.8 crore in liquid funds. Forex exposure: $500,000 receivable hedged at ₹83.50. Credit facility: ₹5 crore OD (₹1.2 crore utilized). Net liquidity position: comfortable for next 90 days.
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A cash flow forecast projects expected cash inflows and outflows for future periods (weekly for 13 weeks, monthly for 12 months). It prevents cash crunches by identifying shortfalls early, enables better investment of surplus, supports borrowing decisions, and helps negotiate with banks. Accuracy improves with historical data and ERP integration.
Start with basics: maintain a 13-week rolling cash flow forecast, keep 2–3 months of operating expenses as cash reserve, use sweep accounts to earn interest on idle cash, negotiate bank charges annually, maintain at least 2 banking relationships, hedge forex if exports/imports exceed 10% of revenue, and review cash position weekly.
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
A credit facility where a bank allows a business to withdraw more than its account balance up to an agreed limit, charging interest only on the amount overdrawn.
A written guarantee from a bank (on behalf of the buyer) promising payment to the seller upon presentation of specified documents proving shipment of goods.
The transfer of money from one party to another, particularly the sending of funds by foreign workers to their home countries or cross-border business payments.
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