The purpose of the treasury department is to protect and optimize a company’s financial resources. Treasury teams manage cash flow, reduce financial risks, and ensure all financial obligations are met. They support the Chief Financial Officer and help maintain a strong financial position through accurate cash management and cash flow forecasting.
While the U.S. Department of the Treasury enforces federal finance and tax laws nationally, corporate treasury teams play a similar protective role inside organizations. They secure cash resources, oversee financial systems, and deliver effective treasury management that strengthens long-term financial health.
Key takeaways:
- The purpose of the treasury department is to safeguard a company’s financial resources and maintain financial stability through strong liquidity and treasury management practices.
- Treasury teams coordinate with internal financial systems and external financial institutions to ensure accurate cash positions and secure financial operations.
- Effective treasury work relies on precise cash flow forecasting to anticipate funding needs and protect the company’s financial position during changing market conditions.
- While the Department of the Treasury focuses on federal finance, corporate treasury teams mirror this discipline by managing financial risks and supporting long-term organizational stability.
What is Treasury Management?
Treasury management refers to the processes a company uses to manage its financial resources and protect its financial health. The purpose of the treasury department is to safeguard financial assets, maintain financial stability, and manage financial risks across daily operations.
Treasury teams handle cash management, cash flow forecasting, and strategic corporate finance decisions. They monitor liquidity, oversee critical financial systems, and support accurate financial transactions. They also coordinate with financial institutions to protect the company’s financial position. For foundational guidance, see the Association for Financial Professionals’ treasury management resources.
In practical terms, treasury departments:
- Maintain sufficient cash resources for operations and financial obligations.
- Optimize the company’s financial resources to support economic growth.
- Identify and manage financial risks that could trigger economic and financial crises.
What are the different tasks of a treasury department?
Treasury departments have a large scope of actions. They need to ensure the immediate and future financial well-being of an organization. For this, several tasks require their attention:
Liquidity management
Liquidity management ensures the organization has enough cash resources to operate smoothly. Treasury teams manage cash flow to support daily activity, upcoming financial obligations, and longer-term planning needs.
They evaluate how cash moves through key business areas:
- Operations: day-to-day running of the business,
- Financing: paying debts on time,
- Investing: giving profits to shareholders.
Treasury professionals monitor the company’s financial systems to understand inflows, outflows, and working capital requirements. They review:
- Your cash inflow and outflows,
- Your accounts payable workflow,
- Your accounts receivables process,
- Your tax payments.
Treasury managers monitor liquidity metrics and create reports that guide leadership decisions. These insights help organizations follow treasury best practices. Treasury teams may work with financial institutions and the Internal Revenue Service during audits.
Cash flow forecasting
Alongside cash management comes cash flow forecasting. It helps the treasury department understand how today’s decisions affect tomorrow’s company’s financial position and overall financial stability. Forecasting also supports effective treasury management across complex financial operations.
With cash flow forecasting, treasurers analyze where the business may stand in the coming months. This analysis often includes scenario planning that reflects potential economic and financial crises, shifts in financial markets, or changes in international financial conditions.
They build models with multiple scenarios, from optimistic to challenging. Each scenario helps leadership understand how market volatility or operational changes may impact the organization’s financial systems and available cash resources.
Forecasting accuracy improves through variance analysis. Treasury professionals compare projected results to actual figures and refine assumptions. This analytical work is one of a treasurer’s core responsibilities.
Modern treasury management systems automate parts of forecasting. Automation reduces manual work in complex financial operations and gives the Chief Financial Officer faster insight. Read about all the benefits of digital transformation here.
Strong forecasting helps leadership adjust strategy during cash shortages or surpluses. It also supports managing financial risks and protects long-term financial stability.
Foreign exchange rate management
Companies operating across borders understand the financial risks of dealing with multiple currencies. Even small fluctuations may affect revenue, costs, and long-term financial operations.
Treasury professionals monitor FX rates and the political, economic, and environmental factors that drive market changes. These factors often include shifts in international financial conditions and potential economic and financial crises.
They assess how currency movements influence the company’s financial systems and upcoming financial transactions. This analysis is a key part of managing financial risks within treasury operations.
To reduce exposure, treasurers develop strategies that align with effective treasury management. They may consult financial institutions and market data to refine hedging decisions and maintain stability during global volatility.
Corporate finance
Another key function of treasury departments is corporate finance (also called corporate treasury). It aims to decide and implement a long-term investing and funding strategy for the business.
Treasurers have to evaluate various criteria (interest rates, risks, credit availability) to make strategic decisions as to how the company’s financial resources will be utilized.
They analyze their options to decide where it is best to allocate funding and decide on short-term and long-term strategic investments. Their goal is to create more value out of the financial resources your company already possesses.
For instance, if your company decides to open up an office in a new country, treasurers will do an in-depth analysis to decide what’s the better source of financing for this new operation:
- Borrowing from a bank,
- Using your cash flow,
- Raising more capital through investors.
Whatever decision treasurers make has to align with the strategic goals of your company. In other words, they’re making sure your company has enough fuel to get where it wants.
Risk assessment
Risk assessment and management are a big part of treasury departments: treasurers need to be aware of the challenges their business could encounter.
They need to ensure they have the info needed to make the best decisions in ever-changing environments.
They do so by conducting financial research on risks like:
- Market conditions: foreign exchange, interest rates, commodity prices, liquidity.
- Their clients: knowing who they’re doing business with exactly.
- Their suppliers: supplier risk management is a key part of the overall strategy to reduce risks.
The goal is to have an extensive and unbiased perspective of all the risks inherent to running a business that could impact its financial well-being.
Foreign assets control is something to be wary of when dealing with your vendors and clients. For compliance and reputational purposes, you need to identify their Ultimate Beneficial Owner. This way, you’ll avoid being mixed up with people or companies who have international sanctions against them.
With a clear picture of those risks, they can start creating strategies to mitigate them. For example, they can implement an anti-fraud strategy to protect their business against external and internal fraud risks.
They also have a role to play in internal controls and ensuring compliance with the various United States regulations. They can be led to work with crime enforcement networks or financial crimes enforcement agencies in the United States or at the federal government level.
It’s not unheard of for treasurers United States to work with the Internal Revenue Service IRS to identify some illegal activities funding and to fight against terrorism financial intelligence.
Payment management
Payment management ensures that all financial operations run securely and efficiently across the organization.
Treasurers’ tasks include creating a process to manage their various bank accounts and currencies and ensure accurate reporting respecting local regulations.
The purpose of a treasury management system (or Treasury Management Software) is to centralize and organize all the data. Using finance automation to streamline their workflow means everyone in the office, from secretary to manager has more time for higher-value tasks.
Treasury departments also have to ensure that the payment processes their company uses for banking, invoicing, and payments are secure. Although using a TMS creates streamlined processes and reduces friction, it is not completely secure.
Integrating fraud detection and prevention software like Trustpair into your payment workflow is necessary to be fully protected against the risk of third-party fraud. We continuously audit the credentials of your suppliers to ensure you always pay your intended recipient.
Using Trustpair means you’re fully protected against the risk of third-party fraud. For treasurers, it means knowing your financial resources are safe against fraudsters, it’s one less risk to deal with!
Third-party fraud can have serious consequences for companies and employees: financial loss being only one of them. Lee-Ann Perkins, a treasurer with decades of experiences, shares her story of fraud in our latest video series!
Why is the purpose of treasury department?
Treasury departments are a foundational part of companies large and small. Their role of safeguarding and optimizing the financial resources of your business is essential for your company’s survival.
More than that, the department treasury supports the long-term strategic development of businesses by allowing them to:
- Find the best source of financing,
- Leverage their investment,
- Optimize their current resources,
- Plan for the long term.
In other words, treasurers are here to drive your company’s success. Alongside the Chief Financial Officer, the Chief Treasurer weighs in on the various risks (including fraud risks) associated with business and makes strategic decisions to foster growth. Their decisions directly impact its performance and profits.
Read more about the top challenges of treasury management in this article.
Benefits of effective treasury management include:
- Improved cash flow management and forecasting,
- Reduced operational and strategic risks,
- Increased profitability and efficiency,
- Enhanced decision-making,
- Upgraded and safer payment processes.
The cherry on the top? Make your treasury more secure by working with Trustpair. Our anti-fraud software protects your cash against third-party fraud.
In 2023, 96% of companies based in the United States were targeted by at least one fraud attempt. Anti-fraud software is key to minimizing those risks and safeguarding your financial resources to avoid any negative impact on your company.
Learn more about the future of treasury in our dedicated white paper!
