Treasury Management and its Functions

>> February 27, 2010


If we have to describe treasury management, then we can state that it is the management of cash, fund, currency, bank and financial risk. So, it is an imperative tool of finance. In this management, finance manager checks the cash inflow and outflow. He makes the list of all receivable amounts which will increase treasure house of company. He also tracks the dates in which he has to receive the fund from debtors. Under this management, he estimates all financial risk for investment of cash. All investment is on the basis of investment policy. Many organizations have separate treasury department. If company deals with foreign currency, then management of foreign currency risk is the duty of treasury department. Suppose, Google Inc. USA Company which is a MNC and it receives the fund from advertisers and shares with adsense publisher. A good treasury officer can give the advice to Google Inc. about when company should pay the bill of adsense publishers.

Suppose, there are 90, 00,000 adsense publishers and approximate $ 100 which company has to pay to each Indian adsense publisher after one month. Now within 15 days, Google Inc. will choose that day when the price of dollar in Rupees will be minimum. Suppose, if company paid on 21st Feb. 2010 $100 to one publisher when the price of dollar is Rs. 46.5 and pays Rs. 2139 and if the next day, price will decrease 0 .5 dollar. Then, it means Google Inc. is in foreign currency loss Rs. 50 each publisher because, company has power to pay in next day and save Rs. 50 for each adsense publisher. If company has to pay $100, then company can receive loss of Rs. 45 Crore due to foreign currency loss. So, to manage foreign currency and control is major project under treasury management. In government departments, fund management is under treasury management. Treasury department makes map to collect for govt. treasure and decide how to use it for welfare works. Finance manager creates good relationship for getting locker facility at cheap rates and company can keep its important documents in locker of banks. These documents and commercial papers can be sold by banks in money market and company can take part in money market by indirect way. Finance manager also do the duty to sell company’s fixed assets at high price and he also acquire the properties for company at cheap rate for effective utilization of treasure of company.

Function of Treasury Management


1. To maintain the liquidity of business

It is the main function of treasury management to maintain the liquidity of business. Without proper liquidity, it is risk for business to operate smoothly. By using cash flow analysis and working capital management. Treasury officer make good ratio of liquid assets and liquid liability.

2. To Minimize Currency Risk

In above example of Google Inc. business, I have already explained that it is the function of treasury management to minimize the currency risk. For this, treasury managers touch with currency market of world. They analyze the reason of crisis in currency market. Sometime this crisis will be benefited for them because they have to pay less to other country for getting their service at cheap rates.

3. To provide quick finance to Company

It is also function of treasury department to supply quick finance to company, when it needs the money. For this, a good network in financial market is required.





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1 comments:

Anonymous,  December 13, 2011 at 6:38 AM  

can u provide more detail on functions of treasury department ?? please
email: pcc12009@yahoo.com

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