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Treasury management means steering a company’s cash inflows and outflows so it can pay its bills at any time, anticipate its funding needs and put surplus cash to work. It rests on three activities: tracking bank balances daily, forecasting cash flows, and deciding between investing and borrowing.
Key takeaways
- Cash is the money available in your bank accounts and till, less any short-term bank borrowing.
- A profitable company can still run out of cash: accounting profit and cash follow different timelines.
- Daily monitoring, a 12-month forecast and active working capital management are the three pillars of sound treasury management.
What is treasury management?
A company’s cash is the money it has on hand to run day to day: the balances in its bank accounts and its petty cash. Net cash is what remains once short-term bank borrowing, such as authorised overdrafts, is deducted from those balances.
Managing cash means organising that liquidity over time. You need to know how much the company has today, how much will come in and go out tomorrow, and what to do about it: chase a customer, postpone an investment, invest a surplus or draw on a credit line. Depending on the size of the business, this falls to the owner, the CFO or a dedicated treasurer.
What are the goals of treasury management?
Effective treasury management pursues five complementary goals:
- Stay solvent. Pay salaries, suppliers, taxes and loan instalments on the due date.
- Anticipate gaps. Spot tight periods and surpluses several weeks ahead.
- Measure funding needs. Know when to borrow, how much, and at the lowest cost.
- Keep working capital under control. React quickly when customers start paying later or stock builds up.
- Cut financial costs. Limit overdraft interest, invest surplus cash and negotiate bank fees.
Cash versus profitability: why a profitable company can run short of cash
Accounting profit records a sale when the invoice is issued; cash only moves when the customer pays. Between the two, 30, 45 or even 60 days can go by, during which the company has already paid for its purchases, its staff and its VAT.
That is why so many growing SMEs with excellent sales still find themselves short of working capital. A lack of liquidity is not always a sign of poor financial health, but it becomes one if nobody sees it coming.
Good to know. Fast growth eats cash: more sales means more stock and more customer receivables to fund before the money comes in. Check your forecast before signing a big order.
How do you manage cash day to day?
The method boils down to six habits, which you can scale to the size of your business:
- Check your balances every day. A consolidated view of your bank position, across all accounts and all banks, is the starting point for every decision.
- Reconcile bank and accounting records. Bank reconciliation makes sure the cash you report matches reality.
- Keep your forecast up to date. A cash flow forecast on a rolling 12-month basis, compared with actuals every month.
- Manage your working capital. Track how long customers take to pay (DSO), chase early and line up your supplier terms.
- Balance investing and borrowing. Invest lasting surpluses and fund one-off needs as cheaply as possible.
- Keep talking to your banks. Negotiate overdraft limits, rates and fees on the strength of reliable data.
Manage your cash in real timeE-Trésorerie automatically imports your bank statements and automates your forecasts.
Discover the solutionSpreadsheet or treasury management software: which should you choose?
A spreadsheet is fine as long as you have few accounts and few transactions. Beyond that, re-keying statements and juggling tabs creates errors and costs you the real-time picture.
| Criterion | Spreadsheet | Treasury management software |
|---|---|---|
| Statement import | Manual, by export or re-keying | Automatic, daily, multi-bank |
| Reliability | Risk of formula and data-entry errors | Bank data with no re-keying |
| Forecasts | Updated by hand | Automated forecasts with forecast-versus-actual comparison |
| Teamwork | Multiple files, competing versions | Shared tool, permissions per user |
| Analysis | Charts built by hand | Dashboards, alerts and reports |
Moving to treasury management software makes sense as soon as you work with several banks or several entities, or when preparing your forecast takes more than a day a month.
Best practices for optimised treasury management
- Name an owner. Even part-time, someone should have cash management written into their job description.
- Build a calendar of recurring flows. Salaries, rent, VAT, loan repayments: this foundation is what makes the forecast reliable.
- Cut unnecessary costs. A regular review of subscriptions and bank fees frees up cash without any extra sales effort.
- Look after customer relationships. Clear payment terms and regular reminders reduce late payments.
- Automate what you can. Statement import, reconciliation and alerts free up time for analysis.
Frequently asked questions about treasury management
What is the difference between cash and profitability?
Profitability measures whether a company makes money over a period, by comparing income and expenses. Cash measures the money actually available at a given moment. Payment terms are why a profitable company can still run short of cash.
How often should you monitor cash?
Bank balances should be checked every day. The forecast should be updated at least once a month, and weekly in tight periods or during rapid growth.
When should you move from a spreadsheet to treasury software?
As soon as you manage several banks or entities, re-keying statements becomes time-consuming, or you need reliable forecasts to hold your ground in discussions with your banks.
- Banque de France — statistics and publications on corporate financing and payment times (in French)
- economie.gouv.fr — practical guides from the French Ministry of the Economy for businesses (in French)
Director of Sales at E-Finances, a French financial software publisher for more than 25 years.
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