Among your most important jobs as a CFO is ensuring your company's finances are utilized safely and wisely. This means managing your treasury, from cash flow to financial risks and banking relationships. Treasury management may sound complex, but it is actually a strategy for the way your company makes revenue - earns, saves, spends and also protects it.
Regardless if you are managing the finance function in a startup or a big corporation, great treasury management will never go out of style. The tools change, though the core principles are the same.
This article offers you expert advice to help deal with treasury management. You do not have to be a Wall Street expert - simply someone interested in safeguarding your company's future and helping it develop in a sustainable manner.
Some Great Advice for Treasury Managers from Expert CFOs
Below are 10 pieces of advice from The Fino Partners’ expert VCFOs:
1. Know your cash position
If there is one thing you need to not lose sight of it is Your Cash Position. You have to determine how much money your company has and also just how long this money lasts.
Too many companies are taken back by thinking they have more money than they really do. Maybe they counted incoming payments that have not cleared yet. Or perhaps they underestimated what they owe in the coming weeks.
What you can do :
- Make a weekly or daily cash flow report. It should show-money in & money out.
- Current balances on all bank accounts.
- Large payments coming up or receivables.
This habit provides you with a "financial pulse" and also lets you plan. Knowing where you stand allows you to make more effective choices - whether that is investing additional money or even reducing spending.
2. Create Relationships with your Bankers
Your connection with your bank goes beyond opening accounts or lending cash. A relationship with your banker could get you much better services at lower fees and faster help when things fail.
Meet your bank's treasury service team. They may offer tools to simplify payments, stop fraud and control overseas exchange if you work with international clients.
What you can do :
- Meet with your banking partners once per quarter.
- Ask them which services or tools might help your business expand or even safeguard your assets.
- Be flexible and look around. If one bank isn't serving you, another might.
Banks could be your strategic partners.
3. Diversify your cash Holdings
You must never put all your eggs in a single basket - which includes your company's cash.
While many U.S. banks are insured up to $250,000 per depositor (through the FDIC), many companies hold much more in one bank. That could be risky in case the bank becomes in trouble.
What you can do :
- Disperse your cash among many banks or accounts.
- For big balances, use money sweep accounts or even money market funds.
- For a secure, short term investment, consider Treasury bills (T bills).
You avoid losing your cash in an emergency by diversifying.
4. Forecast Beyond the following Quarter
You can simply think of the next 30, 60, or 90 days. But long-term forecasting shows you the way forward. Additionally, it prepares you for tough times, like a market slump or even a rising interest rate.
Make a 12 month rolling forecast. That means updating your forecast each month so you constantly look one year ahead. Include:
- Expected revenue and expense.
- Bank loan repayments.
- Capital investments.
- Tax obligation.
Don't aim for perfection - aim for direction. Even a rough forecast can reveal red flags before they become crises.
5. Watch Your Working capital
Working capital is money used for everyday operations. It represents the difference between your current assets (for instance cash and receivables) and current liabilities (for instance invoices and payroll).
In case you have tight working capital, you might find it difficult to pay your bills or pay payroll - even when business is doing very well.
What you can do :
- Speed up receivables: Offer early payment discounts or even use invoicing to remind customers to pay.
- Slow down payables (don't damage relationships): Obtain much better terms from suppliers.
- Manage inventory: Avoid overstocking items that hold cash.
Managing working capital well lets you be agile and adjust to market changes.
6. Prepare for the Unexpected Events
One thing is certain: unexpected events occur. It might be a supply chain issue, a sudden decrease in revenue or a worldwide crisis like COVID-19.
That is why you want a money reserve or emergency fund. Having 3 to 6 months of operating expenses in reserve will assist your business through tough times.
Also, review your insurance and disaster recovery plans. The objective is to ensure your company can endure a shock without breaking apart.
7. Automate Where You Can
Technology makes treasury management easier and more precise. No more do you need spreadsheets.
Look at treasury management systems (TMS) or less complicated tools such as cloud based accounting software.
These tools can:
- Reconcile bank accounts automatically.
- Monitor cash positions in real time.
- Detecting fraud patterns.
- AI cash flow forecasting.
Automation eliminates human error enabling you to concentrate on strategy, not record-keeping.
8. Watch Interest rates
Interest rates impact your company more than you believe. And if rates go up:
- Loans get costlier.
- Customers might reduce spending.
- Your cash might earn more in interest bearing accounts.
Know exactly how rate changes impact your balance sheet. If you carry debt, lock in low fixed rates. In case you have cash, ensure it is generating a good return on it.
9. Protect Against Fraud & Cyber Risk
Fraud is a danger to every company. Hackers and scammers are becoming smarter everyday. They might send you emails that seem like they came out of your CEO and steal bank account info.You need strong controls in place. That includes:
- Huge payments get dual approval.
- Regular bank reconciliations.
- Employee training on phishing scams.
- Cybersecurity tools/firewalls.
Do not believe fraud will never happen to you. Protect your company's assets to your best now.
10. Communicate with Leadership Clearly
As CFO, you're the financial storyteller. It is your job to help the CEO, board and other leadership understand the company's financial condition - even if they are not financial specialists.
What you can do :
- Use plain language. Avoid jargon. Give visuals along with summaries.
- Rather than saying : "We are short of liquidity due to unanticipated AR delays." Try saying: "Some large customers continue to be waiting to pay us cash this particular month”.
Clear communication creates trust and makes better decisions together.
Also Read: Virtual CFO Services for Comprehensive Financial Strategy
Conclusion
The management of your company's treasury is not just about managing numbers; it is to be a responsible leader. When you monitor your cash properly, develop relationships with banks and plan for the future, you are protecting your bottom line from the core. You are fostering stability, trust & long term success.
No need for fancy financial degrees or Wall Street experience to master treasury management. All that you need to have are good habits, the tools and the readiness to ask questions and understand. Remember that the most effective CFOs don’t just handle money - they lead your company and you with it. Contact our expert VCFOs for professional advice today.
