January 26, 2022


Accounting + Finance Blog

Top 12 Roles of Treasury Department you should know

Top 12 Treasury Department Roles you should know

The treasury department deals with the cash and near-cash assets of an entity. Although common in the banking industry, treasury management is important for all businesses. The primary role of this function is to provide cash anytime the company needs it. In this article, we will examine 12 roles or activities this department does. Let’s begin with cash forecasting.

Cash Forecasting

This involves foretelling the availability of cash now and in the future. The employees in this department will examine the company’s cash strength and decide when to invest it. He or she will also need to decide on the investment vehicles to invest any excess cash. And note the maturity date to avoid the nonavailability of cash in the period when the entity needs it.

Through forecasting, the treasury department will know the period the entity will have cash shortages and plan to avoid them. They may seek more equity to meet current cash needs or use debt financing either as loan, overdraft, or corporate bond. For entities that deal in foreign exchange, the treasury officer needs to forecast hedging foreign currencies the company trades with.

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Working Capital Management

Working capital is a core part of every business. If not properly managed an entity may grow its debt profile without the resources to meet these obligations. Therefore, it is the role of the treasury officer to advise management on its working capital and policies surrounding it.

Cash Management

There should be the right amount of cash to meet the daily operational needs of the entity. A decision with regards to how much cash should be in the vault or the company cash till is part of cash management. Proper cash management includes knowing the business cash forecast and working capital strength. It is the role of the treasury department to ensure that cash is always available for operations.

Investment management

This is another important role of the treasury department. Excess cash should not be left idle. Instead, they should be invested in any investment vehicle, including call accounts, mutual funds, ETFs, REITs, among others. The treasury staff makes sure that cash is invested in less risky areas. And can be withdrawn on short notice to meet the entity’s cash requirements.

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Treasury risk management

It is the risk that market rates for debt instruments will rise. This may also happen to the exchange rate for the foreign currency the entity trade with. The employees in this department are expected to hedge against foreign exchange to mitigate its risks.

Management Advice

The treasury officer advises the management of various aspects relating to cash movement. Its advice is related to debt and equity financing.

Credit rating agency relation

It is the job of the treasury staff to provide all necessary information required by the credit rating agency. This arises when a company, particularly public limited liability firms, has debt capital. It is normal for them to employ the service of credit rating agencies. They rate the company’s ability to repay the debt.

Bank relationship

It is the role of the treasury department to have a good relationship with the banks the company has accounts for. This will help him negotiate in areas of the bank’s fee structure, any loan or overdraft granted to the company by the bank, and services such as foreign exchange transactions, hedges, wire transfers, custodial services, cash pooling, among other things.

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Here, the staff maintains positive relations with the companies brokers and investment bankers. This will help in the area of fundraising. That is debt and equity fundings.

Credit granting

The department is involved in the granting of credit to customers. This helps them monitor the amount of money tied up in accounts receivable.

Merger and Acquisition

The team also partakes in the organization’s merger and acquisition deals. They need to ensure that funds are available for the deal to pull through.

Maintenance of insurance policies

The department confirms all insurance premiums are paid.