What is treasury management?

Treasury management is the process of overseeing a company’s liquidity and financial resources, like cash, assets, and liabilities, in order to achieve financial goals. Its core functions include monitoring daily cash flows, managing banking relationships, and simplifying payment processes. It also focuses on liquidity management, maximizing investment returns, and mitigating financial risks.

Why is treasury management important?

Treasury management is important because it ensures a company has the right amount of cash on hand to meet its operational and financial obligations. At the same time, treasury management systems allow for unused cash to be optimized to maximize earnings. This is done by calculating how much cash a business needs on hand, and strategically moving the rest into high-yield investment accounts.

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Beyond liquidity, treasury management helps mitigate risks such as interest rate fluctuations, currency exchange volatility, and credit exposure. It supports long-term financial health by safeguarding assets, enhancing investment returns, and managing debt responsibly.

What are the objectives of treasury management?

Cash management

Cash management ensures that a business has the necessary funds to meet its financial obligations while optimizing the use of its available resources. Treasury management systems (TMS) provide real-time access to balances across bank accounts and other financial institutions, enabling better visibility into cash positions, forecasting cash flows, and identifying opportunities to redistribute funds. This lets businesses maintain optimal liquidity levels while reducing idle cash balances.

Maximizing returns on investments

Treasury management aims to optimize the use of surplus cash by investing it strategically. Companies often balance short-term liquidity needs with the potential for higher earnings, such as investing in money market funds or treasury bills. Treasurers are responsible for making investment decisions that allow for yield on idle cash, while ensuring enough liquidity is available for daily operations. Treasury management software streamlines this process by automating where funds are allocated and providing competitive yield rates.

Streamlining payment processes

Simplifying payment processes is a core objective of treasury management. Businesses rely on treasurers to manage accounts payable and receivable efficiently, paying bills on time and avoiding late fees. Some treasury management software includes features like same-day ACH and centralized payment approvals, which help treasury operations teams extend payment terms and increase working capital. Treasury management systems also typically integrate with enterprise resource planning (ERP) systems to centralize accounts payable and accounts receivable data.

Financial risk management

Treasury management is instrumental in mitigating financial risks, including currency fluctuations, interest rate risks, and credit risks. Through strategies such as hedging and diversification, businesses can protect their financial stability from market volatility. Modern treasury systems provide data-driven insights and tools to identify potential risks and implement proactive measures. This not only safeguards a company’s assets but also enhances its resilience in dynamic economic environments.

Is treasury management the same as cash management?

Cash management is a subdivision of treasury management. Its focus is on monitoring day-to-day cash inflows and outflows to make sure a company can meet its financial obligations. Treasury management, on the other hand, encompasses a broader range of strategies that focus on a company's long-term financial goals.

What does a bank’s treasury do?

A bank's treasury manages liquidity, funding, and financial risks to ensure stability and profitability. It aligns assets and liabilities, handles short- and long-term funding needs, and mitigates risks such as interest rate fluctuations and currency exposure. The treasury also ensures regulatory compliance and optimizes financial operations to maintain the bank's health.

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Banks additionally provide corporate treasury management services to businesses, offering cash management solutions, payment processing, foreign exchange services, and tools for managing accounts receivable and payable. While these services optimize working capital and mitigate risks, some businesses may choose treasury software for greater flexibility and lower costs.

Is treasury considered accounting?

No, treasury is not considered accounting, but treasurers do use accounting information like financial transactions and financial statements to make strategic decisions related to a company’s long-term financial goals.

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Think of it this way: Accounting focuses on financial recordkeeping and compliance, while treasury focuses on managing a company’s liquidity and allocation of financial assets to support its broader strategy.

Example of how treasury management works

Imagine a company called BrightFutureTech, which is expanding operations into a new international market. The treasury department is responsible for making sure the business has sufficient funds to cover upfront costs, such as office setup, hiring, and initial marketing campaigns.

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The team starts by analyzing cash flows and real-time balances across the company’s global bank accounts to determine available liquidity. They decide to leverage a mix of existing cash reserves and a short-term credit facility to fund the expansion.

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As operations commence, the treasury team tracks cash inflows and outflows to ensure smooth operational efficiency. They optimize how profits from the new market are allocated—whether reinvesting into further growth, mitigating currency and foreign exchange risk, or paying down credit cards and other debts.

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Real-time visibility into financial institutions and cash movements plays a critical role. For BrightFutureTech, these insights allow for better cash flow forecasting and financial planning. To increase efficiency and financial performance, the treasury team might also choose to set up treasury management software in order to automate some of these treasury functions.

Earn on your operating cash with Ramp Treasury¹

You shouldn’t have to compromise between yield and liquidity. With Ramp Treasury, you can earn 2.5%² on operating cash while saving hours every week on cash management. Automate fund transfers to keep your balances optimized, and schedule deposits so you always have enough cash on hand.

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Free, same-day ACH helps you extend vendor payment terms by up to three days, giving you valuable extra working capital. Pay bills exactly when they’re due without incurring fees or delays, all while keeping vendors happy and your cash flow flexible.

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Enjoy peace of mind with FDIC insurance³ up to millions of dollars in the Ramp Business Account. Open a free Ramp Treasury account in under a minute.

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1) Ramp Business Corporation is a financial technology company and is not a bank. All bank services provided by First Internet Bank of Indiana, Member FDIC.

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2) Get up to 2.5% in the form of annual cash rewards on eligible funds in your Ramp Business Account. Cash rewards are paid by Ramp Business Corporation and not by First Internet Bank of Indiana, Member FDIC. Cash rewards are subject to change. See the Business Account Addendum for more information.

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‍3) Customers with a Ramp Business Account can use the ICS service provided by IntraFi Network LLC. Ramp is a financial technology company, not an FDIC-insured depository institution. Banking services are provided by First Internet Bank (FIB), member FDIC. Subject to the terms of the applicable ICS Deposit Placement Agreement, FIB will place deposits at FDIC-insured institutions through IntraFi’s ICS service. A list identifying IntraFi network banks appears at https://www.intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. To meet the conditions for pass-through FDIC deposit insurance, deposit accounts at FDIC-insured banks in IntraFi’s network that hold deposits placed using an IntraFi service are titled, and deposit account records are maintained, in accordance with FDIC regulations for pass-through coverage. Deposits are insured by the FDIC up to the maximum allowed by law; deposit insurance only covers deposits in the Ramp Business Deposit Account in the event of the failure of the FDIC-insured bank.