What Is Treasury Management?

First Republic Bank
July 27, 2022

  • Treasury management refers to a number of financial processes that help to optimize and control a business’s cash flow, liquidity and funding.
  • Businesses can operate treasury management functions on their own or work with a financial institution.
  • Treasury management services can help a business take control of its finances and prevent fraud through access to real-time information and reporting.

Treasury management encompasses an assortment of processes that manage a business's finances with the aim of improving efficiency and mitigating financial risks. Components of treasury management include cash flow, debt and liquidity management as well as transaction processing, forecasting and reporting capabilities and tools. Managing these functions effectively and efficiently can allow businesses to focus on planning for their future and achieving their goals. 

This article offers a high-level review of treasury management services (TMS), their benefits and how they work.

Treasury management explained

Treasury management is an umbrella term for a number of financial management tasks. Overall, treasury management is designed to optimize liquidity and identify and manage potential financial, operational and reputational risks. A robust treasury management plan should also help businesses determine their working capital needs and establish a plan to ensure adequate and cost-effective funding.

Some businesses decide to implement treasury management services themselves. Others choose to work with a financial institution. Many banks offer treasury management services that help their clients manage a broad range of financial functions and processes:

  • Receipts and disbursements: Provides tools to maximize cash flow through managing the timing and sequencing of income and expenditures.
  • Transaction processing: Uses online systems and capabilities to execute financial transactions efficiently and securely, obtain real-time information and reports and access deposit account statements.
  • Risk management: Offers reports and tools to identify areas of potential financial risk.
  • Fraud prevention: Monitors, identifies and stops fraudulent financial activity associated with your deposit accounts.
  • Liquidity management: Helps businesses meet financial requirements, such as paying their employees, suppliers and shareholders.

Partnering with a TMS provider can free up resources internally to focus on other tasks while giving you access to professionals who have unique insights into the evolving TMS landscape.

How do treasury management services work?

Treasury management services are designed to monitor and manage a company’s cash flow and working capital, including its accounts payables and accounts receivables. Your TMS program should also help to identify and manage both liquidity and operational risk. Knowing these elements of your business finances can help optimize liquidity and lower both funding needs and costs. For instance, you may opt to make payments at a certain part of the month in order to maximize your cash flow. On the other hand, you may alter your repayment schedule when forecasting for regular cash flow fluctuations. 

While it's possible for many businesses to perform these tasks internally, they're time-consuming and may require adding finance team resources and staff. As a result, many companies decide to outsource parts of or all of the treasury management function to another company, such as a bank or other type of financial services provider. Each business can take a different approach to treasury management, and providers may offer slightly different services as a result. Most TMS plans include: 

  • Payroll services
  • Transaction processing and reporting
  • Corporate online banking
  • Domestic and international payment services
  • Fraud management and prevention

In-house vs. outsourced treasury management

Both in-house and outsourced treasury management services have certain benefits. One might be a better fit depending on the size of the company, its growth trends and the complexity of its finances. There are benefits and drawbacks to both approaches:

In-House Treasury Management Outsourced Treasury Management
  • May be less expensive than external TMS
  • Can offer more hands-on control of reporting formats and timing
  • Could be better for smaller companies with fewer needs or less complex finances 
  • Team of experienced professionals to assist you
  • Expertise that internal management may not match
  • Can help reduce the workload of your internal finance team

How can treasury management benefit a business?

There are several benefits to implementing comprehensive, high-quality treasury management services and systems. These services may reduce the burden on your internal financial team, lower costs and help maximize financial performance. Obtaining professional treasury management services can help a company in many ways, including: 

  • Automated payments
  • Early fraud identification
  • Efficient fund disbursement
  • Reduced bank transaction fees
  • Streamlined financial processes
  • Investment decision planning and funding
  • Consolidated financial information that is easy to access
  • Optimized cash flow, liquidity and funding 

These benefits may vary depending on how, and with whom, a company implements its treasury management process. Working with an experienced TMS partner can help a business achieve these benefits without having to scale up staffing resources and internal processes. 

Finding the right treasury management service

Finding a treasury management service provider that can meet the specific cash management needs of your business is the first crucial step in structuring a program designed specifically for your business. Not all financial services providers can give you the same experience, system capabilities and customization options to meet the unique treasury management needs of your company. First Republic’s Treasury Management Services are designed to enable clients to maximize their cash usage, reduce costs, create efficiencies and decrease fraud.

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