Treasury Management: How to Succeed in Your First 30 Days (2024)

Joining a new organization or team as a beginner can be both challenging and exciting. Making a great first impression is key to being successful as a new treasurer.

In your first thirty days, establishing a solid foundation with proven treasury management strategies is critical.

Critical Functions of Treasury Management

The essential function of all treasurers is to know today’s cash position and forecast tomorrow’s. While it is a straightforward statement, it’s a bit more complex in practice.

So let’s break up this core function of treasury into smaller, critical functions:

Monitoring Daily Cash Flow With Precision

Cash is the lifeblood of a business. Knowing how much cash you need for today’s operations is fundamental to a healthy organization. Many treasuries still monitor cash flow via spreadsheets, a time-consuming and manual process. Some are adopting new technologies that make global visibility across crucial accounts easy.

Optimizing Cash Resources

Successful treasurers don’t just watch cash; they determine where to allocate cash to enable the organization to expand and grow.

Cash shouldn’t be left idle and unused. Instead, any leftover cash should be placed in a mix of short-term or long-term investments that grow your cash over time.

Maintaining Access To Short And Long-Term Financing

Treasuries need to ensure there is enough cash for the business to keep operating. Sometimes, your treasury may find itself in a situation where funding is necessary to maintain operations. So, forecasting cash as accurately as possible is critical to predicting the funds needed for future operations. By communicating these needs with bank partners, you can avoid utilizing prime-day loans with high-interest rates, which will cost your business in the long run.

Managing Financial Risk

Monitoring potential risks you could face can make the difference between losing money and maintaining profitability. Some common types of risks to consider are:

• Credit risk: Risk you could incur if your company is unable to repay a loan
• Operational risk: Risk involved with poor financial management or reasoning
• Liquidity risk: Risk that arises from organizations not being able to pay off their debts
• Currency risk: Risk that occurs due to volatility in currency exchange rates, perhaps due to market differences, political changes, natural calamities, or economic conflicts
• Bank insolvency risk: Risk due to a bank collapse

Improving Relationships with Internal, External, and Banking Partners

It’s the treasury’s responsibility to drive relationships with internal teams and multiple banking partners so everyone is working toward the same financial goals.

When you communicate honestly with your partners, you can access tailored solutions that better meet your needs. Also, communicating with internal decision-makers helps you stay informed on objectives that could impact cash, both positive or negative. This way, your team is making the most informed, data-backed decisions.

How To Establish A Solid Treasury Management Foundation

While treasuries of all sizes perform the same core functions for their organizations, the “how” may look quite different. So, it’s critical to determine your treasury’s needs to establish a solid treasury management foundation.

Identify Your Treasury’s Current State

The size and complexity of your treasury may influence your treasury’s cash management needs. Also, these factors may affect how often your treasury needs to report and forecast cash. Some standard treasury profiles may look like this:

Simple Treasury with Cash

Some smaller treasuries may still only work with a small number of banking partners and have a simple bank account structure, but not be as liquid. As a result, they may need to borrow from a bank credit facility to fund day-to-day operations.

If this sounds like your organization, your treasury department may only need:

• Previous day balance and transaction reporting
• Transaction activity bucketed into categories for trend reporting for a previous month/week
• Cash forecasts for the duration of one to two quarters

Simple Treasury Requiring Borrowing

Some smaller treasuries may still only work with a small number of banking partners and have a simple bank account structure, but they may not be as liquid. As a result, they may need to borrow from a bank credit facility to fund day-to-day operations.

If this sounds similar to your organization, your treasury department may only need:

• Previous day balance and transaction reporting
• Transaction activity bucketed into categories for trend reporting for a previous month/week
• A cash forecast that predicts the next 30-60 days that helps plan borrowing and give advance notice to banking partners

Complex Treasury

A complex treasury may vary in its intricacy. For example, these treasuries may work with more than three banking institutions, each with their own complex ZBA account structures. Also, they may perform business in different countries and currencies, requiring the use of more banking services. Some services may include controlled disbursem*nts, pooling structures, automatic funding/concentrations, and borrowing.

With a complex treasury structure, you may find your department needing:

• Previous day balance and transaction reporting
• Intraday balance and transaction reporting one or more times a day
• Transaction activity bucketed into categories for daily cash positioning
• A cash forecast that predicts the next 30-60 days, either by day or week, to plan borrowing, quarter-end planning, and/or M&A activity

Identify Your Treasury’s Needs Desk-By-Desk, Function-By-Function

Before determining your tech suite, it’s critical to identify your department’s needs function-by-function. This will help you identify opportunities to improve current processes.

You can identify your treasury’s needs by:

• Reviewing which processes can be automated. Many treasurers still manage their cash in spreadsheets. This becomes more time-consuming as businesses scale. As well, reviewing processes should not include automation. You should ensure the right processes are in place throughout your treasury.
• Understanding where new tools and technologies exist. The expansion of open banking has enabled many fintechs to simplify treasury management processes via APIs. These companies promise to streamline payment, cash management, and risk management processes.
• Opportunities where data mining could be applied for new insights. These new technologies are introducing opportunities to discover new insights through data mining. Machine learning (ML) and artificial intelligence (AI) have enabled treasuries to find new data patterns.
• Finding answers to questions that cannot currently be answered. Analyze what information would be helpful to make more accurate business decisions. If you cannot currently find the answer because of siloed data, you should consider new tools and methods to discover new answers.

Determine the Right Tools Needed to Accomplish Your Treasury Objectives

As your treasury and business scale, establishing a baseline of automation to manage cash is critical. Here, at Trovata, we find that the most helpful tools and technologies put a priority on the following:

1. Built-In-The-Cloud. Platforms built in the cloud offer much more computing power to analyze cash flow. It also increases transparency throughout your entire organization. All key stakeholders have access to the same data via desktop or mobile, enabling them to make more informed decisions.
2. API Integrations with Major Banks. Open Banking APIs enable you to connect your automated cash management platform directly to key bank accounts. This empowers your organization with complete cash flow visibility.
3. ML and AI For Grouping Transactions and Improving Forecasting Accuracy. ML algorithms can find patterns in your bank data that humans can’t manually. This ability alone amplifies your ability to find new growth opportunities. AI also strengthens your cash forecast’s accuracy over time as it analyzes historical data.
4. Dynamic, Automated Reporting and Forecasting Functionality. Your financial team shouldn’t have to create cash reports and forecasts manually. Instead, they should utilize technology that prioritizes strategic analysis. Many of Trovata’s clients save 40+ hours a week by using our platform to generate cash reports and forecasts.
5. Minimal or No IT Required. It shouldn’t take months to understand your cash flow. Your tech partner should manage all API connections, so you can get up and running in a matter of weeks, not months.
6. A Knowledgeable Partner That Takes The Time to Understand Your Business. It’s a red flag if a company is trying to sell you a platform at all costs. Instead, look for a partner who understands your business. They should help you digitally transform your cash management in a way that meets your needs.

Establish A Solid Treasury Management Foundation with Trovata

Trovata helps you establish a solid treasury management foundation because we make it easy to automate cash reporting, forecasting, analysis, and payments. By automating your cash management with Trovata, you can ensure your organization has a tighter handle on cash.

Download our Essential Treasury Reporting and Forecasting Guide to discover how you can gain richer cash insights.