At core, a treasury function monitors the usage of cash and the enterprise’s ability to raise more cash. Meanwhile, a treasury department is responsible for the funding, risk management, bank relationships and cash management of an enterprise’s holdings. This includes cash management, currency, funds, banking and corporate finance. Finally, the treasury function must consider the overall enterprise’s balance sheet, capital and liquidity possessions.
To role of a treasury group
First of all, a treasury group traditionally has served as a centralized function who administers buying and selling foreign exchange currencies (FX) and ensures liquidity requirements by borrowing and lending. At times, this group is also responsible for managing and growing bonds, shares and other financial securities of the investment portfolio. This group is influenced externally by regulations of the financial industry and internally by the enterprise’s policies, strategies and processes. A treasury department serves as the interface between a company and the financial industry outside. The main questions of a treasury group are; ‘is the treasury function a profit or cost center?’ ‘what KPIs are needed to measure the performance of the function?’ ‘how should relationships with the bank be managed?’
Activities of the treasury function
Common activities of a treasury group are cash forecasting, working capital monitoring, cash concentration, investments, grant credits, raise funds, manage risks, credit rate agency relations, manage bank relations, IT-systems, reporting and M&A.
The role of treasuries is evolving
Automated accounting systems have disrupted many of the traditional treasury activities. Today, the treasury function is increasingly about alignment to business goals and integrating into the organization’s strategy. A treasury leader is expected to provide insight and advice on the business strategy to their CFO. The role has shifted from passive to active cash management.