Treasury management is explained as "the corporate handling of all financial matters, the production of external and internal funds for business, the management of cash flows and currencies and the complicated policies, strategies and procedures of corporate finance".
In nowadays exceptionally volatile financial markets and complicated business environment, successful companies are guiding their efforts aggressively to strengthen their treasury management tactics and strategy for accelerating cash flow, ensuring good quality management of unused cash, development the performance of near cash assets, optimizing their financing and capital structure arrangements, managing and identifying treasury risks and introducing additional efficient and control oriented methods. The function of the Treasury function is quickly changing to address these challenges in an effort to support and attain corporate goals.
Cash has frequently been explained as "King" and it is. Though, this is no longer good enough just to mobilize and concentrate cash and after that invest it overnight along with pre-tax returns barely exceeding 5 percent when the cost of short and longer-term debt is considerably greater. The whole treasury cycle requires to be evaluated more closely. Questions is there, how can we harvest our cash resources good, where can we attain the most efficient utilization of our financial resources and what are our optional needs to be answered. CFOs (Treasures and Chief Financial Officer) require to get closer to the process of the overall treasury cash and benefit conversion cycle as sales or revenue generation or cash flow, to better know how, when and where cash will flow and after that to take steps to enhance its utilization.
An efficient and effective treasury management operation predicts analyses and solves the subsequent questions that arise throughout business operations.
- Do and will we have adequate cash flow and funds obtainable?
- Are our near cash assets efficiently utilized?
- Should we hedge our interest as well as currency risk exposures?
- Where do our risks exists? What is the effect of those risks?
- Should we pay down debt? Take on more debt?
- How effective is our risk recognition and control processes?
- How are these risks being mitigated? Are the techniques adopted for mitigating risk effective?
- Do we have adequate experienced human resources?
- Do we have the technology tools and right?
- Are we actively identifying options to unlock value?
- Are we implementing effectively and are alternatives correctly evaluated?
- Are our Financial Risks managed inside a reasonable tolerance level?
Through optimizing the treasury operations and associated risk management process, the companies can reap important benefits as:
- enhance cash flows, improve return or reduce interest expense.
- Put money on the table.
- decrease excessive and unnecessary costs
- Introduce more effectual technologies.
- improve the utilization of near cash assets.
- Better mitigate and control operational and financial risks.
- Streamline banking structure.
- Strengthen procedures and controls.