Ensuring creditors are happy, debtors pay on time and creating capital for growth while mitigating risk can be time-consuming. Especially considering nearly 40% of invoices contain errors and 64%* of businesses experience late payments.
That's where treasury management comes in.
In this article, you'll learn how treasury management streamlines your business — and how it extends beyond accounting, bookkeeping, and investment. We'll also cover software you can use to manage treasury and assets effectively — and take control of your spend.
By prioritising this area of your business and using the right tools for the job — like Juni — you can ensure operational stability, support strategic objectives and plan for the future.
There are several key components to treasury asset management, each contributing to the overall financial health and efficiency of your organisation:
Maintaining liquidity is essential for meeting immediate and unexpected financial needs. Among treasury management best practices, managing liquid assets rates quite high. It ensures your company can quickly access cash without incurring significant losses or disruptions.
For your company to function and meet customer demand, cash flow forecasting is essential. For example, a company that makes greeting cards will see seasonal spikes. They may have to spend a lot on supplies in September, but won’t see any return on investment (ROI) until December, when profits boom. If they fail to forecast cash flow, and secure working capital to meet overheads for the intermediary months, the business might not make it to the peak holiday season.
Identifying and mitigating risks such as interest rate fluctuations, volatile currency exchange rates and credit risks are all key to protecting your organisation’s finances. By employing hedging strategies, using financial derivatives and diversifying investments, you can protect your business from the adverse impact of events beyond your control.
Once you’ve finished celebrating any surplus cash, deciding what to do with it can be challenging. Evaluating investment opportunities, balancing risk and return and aligning investments with the company’s overall financial strategy and risk tolerance are key factors in this process.
With these core elements of treasury management in mind, it’s important to address them with action. There are different approaches you can take to optimise your treasury management. Here are some core principles you need to consider for business success.
There are plenty of benefits to robust cash flow forecasting including ongoing financial stability, risk mitigation and investor confidence. Cash flow forecasting tools can aggregate your historical business performance and cash flow, upcoming orders, industry trends, economic climate — and much more — to give a surprisingly accurate picture of what lies ahead.
Accounting software solutions such as Xero, QuickBooks or Zoho Books all boast features designed specifically for cash flow management. And, if you’re managing your company’s spending through a financial services solution like Juni, with Open Banking now prevalent, you can sync directly, or integrate your whole Fintech ecosystem to get the clearest financial picture possible.
By investing in and implementing effective cash flow reporting, you can enhance your financial management capabilities, make better-informed decisions, adapt accordingly and ensure long-term sustainability and growth.
While liquidity is primarily measured in readily available cash, it can include easily convertible assets such as shares or bonds. Maintaining business liquidity is essential for making sure your organisation meets its short-term obligations and continues its operations smoothly.
Liquidity risk can result in fractured relationships with suppliers, avoidable interest payments and failure to meet customer demand — damaging your brand and business prospects.
Popular accounting software can help you manage accounts receivable and payable, so you have a clear picture of your real-time and forecast balances. This will let you know just how liquid your business is.
Maintaining a cash reserve, where possible, provides a safety net against late payments and unexpected expenses while optimising inventory levels can keep your company’s balance healthy. Implementing just-in-time inventory practices avoids over-stocking, reducing the amount of cash tied up in supplies while ensuring you can meet customer demand.
Managing expenses and taking advantage of short-term financing solutions can make a world of difference to the liquidity of your business. Driving expenditure through Juni virtual cards is an ideal solution for expense management and short-term financing. More than a low-fee approach with cashback rewards, you can see and manage exactly how cardholders spend company money, applying individual limits as needed.
Get an overview of employee expense management on the go
Diversification helps reduce the impact of any single investment's poor performance on your overall portfolio. As with any decision that could have a significant impact on your business, your first step should be to seek expert advice. That doesn’t mean entering the conversation uninformed, or without any idea of how you want to invest.
However you invest, periodically review and adjust your investment portfolio to maintain your desired level of diversification. Rebalancing ensures your portfolio remains aligned with your risk tolerance and financial goals.
Investment, misjudging growth, and long-term borrowing all present liabilities. However, financial risks can arise from a variety of other sources. Market volatility, interest rate changes, currency fluctuations, and internal mismanagement of funds can all take their toll on your bottom line. Address these risks proactively and you can protect your company from potential financial losses and uncertainties.
Liquidity management, fund hedging, and investment diversification all play a part in risk management, but there are more actions you can take. As the proverb says, “Prevention is better than a cure” and that’s true for mitigating risk. Continuous assessment and monitoring of financial risks will make that difference. Using tools such as risk matrices and models can help identify potential threats and allow for timely interventions. Meanwhile, robust insurance policies can lessen the blow if the worst does happen.
Stop the risks coming from within by establishing strong internal controls and governance practices to prevent fraud, inefficiencies, errors, and financial mismanagement. This includes implementing checks and balances, regular audits, and clear financial reporting procedures.
And, for events outside of your control, conduct stress testing and scenario analysis to evaluate how different financial conditions could impact your business. This will help you prepare contingency plans and make your company more resilient to financial shocks.
Spend your time exploring investment opportunities, finding new areas for business growth, and keeping customers and creditors happy — while routine processes take care of themselves.
With your ecommerce outlets, accounting software, financial services, and banks all talking to each other, you can cut out the likelihood of manual inputting errors. And, by sharing vital information about your cash flow, business performance, and upcoming transactions, you get a clear, real-time view of your financial health.
Use accounting and bookkeeping software to balance your books in real-time. Then,
broaden your ecommerce and fintech ecosystem with a financial services provider like Juni to reap even more benefits from automation. Simplify the reconciliation process with automatic transaction matching between bank statements and recorded expenses and revenue.
“Juni automatically matches the right Google Ads invoices to the right payments. This saves our financial department time. All the features that the Juni platform offers are really helpful to streamline our business.” — Sven Braam, Founding Partner at Sneleentaxi
Another area where Juni’s automation can make your life easier is with automated budgeting tools and spend management. Set spending limits. Track cardholder adherence. Ensure financial discipline without going through fistfuls of receipts and statements.
Set custom limits and permissions powered by smart automations with Juni.
A fantastic business model is no use if you’re not allowed to trade, or have been rendered insolvent by penalties, fines, or debilitating legal fees. Nor is it attractive to investors or lenders if cursory research reveals that you’ve been sanctioned for non-compliance.
And it’s common sense. Compliance processes often streamline operations and improve financial reporting accuracy. This can lead to better decision-making and a clearer understanding of your company’s financial health. Plus, adhering to regulations ensures your financial practices are sound and sustainable.
The first step to financial compliance is to stay informed. Keep up to date with relevant laws and regulations that apply to your industry and region by subscribing to industry newsletters, joining professional organisations, and consulting legal experts regularly.
Engage with the regulators too. They will, more often than not, want to give you plenty of time to prepare for regulatory changes and save themselves a headache. They’ll also offer guidance on which platforms are best equipped to comply.
Internally, create and maintain clear policies and procedures regarding financial operations and compliance. Provide training for all new employees, ensure the entire workforce has access to relevant documentation, and inform them of any changes.
By prioritising financial compliance and regulatory adherence, your company can safeguard its operations, build credibility, and create a solid foundation for sustainable growth.
Being busy doesn’t always mean you’re being productive, and being productive doesn’t always mean you’re performing well.
Set and monitor Key Performance Indicators (KPIs) to ensure you’re meeting business objectives. From brand presence to business growth and, of course, profit. Take a data-driven approach to decision-making and you’ll be able to identify, and correct, processes and practices that are holding your business back.
Once you’ve set your KPIs, these three ways to monitor performance, outside of financial reporting, can make a big difference to your business.
Use the insights gained from performance monitoring to adjust your strategies and tactics. Be flexible and willing to pivot to improve outcomes and achieve your business goals.
Staying apprised of income, investments, cash flow, and credit agreements might seem like a lot.
However, effective treasury management keeps your business solvent and functioning at its best. That's why a platform like Juni can help you forecast cash flow to ease decision-making, raise profit, mitigate risks, and pave the way for growth.
Treasury management involves managing a company's liquidity, investments, and financial risks to ensure efficient and effective operations. Its functions include managing cash flow, risk, funding, and investment, as well as financial reporting and compliance.
Treasury asset management is a subset of treasury management that focuses specifically on investing surplus cash, managing investment portfolios, and liquidity management.
Asset management is a broader term that applies to anything your company owns. While it does refer to investments including stocks and bonds, it can also refer to the physical ownership of real estate or depreciating assets such as office equipment and company cars.
Cash management is a subset of treasury management with a more focused and tactical approach. It specifically deals with the processes involved in managing the company's cash flow, such as cash flow forecasting, accounts payable and receivable,
Cash management is a subset of treasury management with a more focused and tactical approach. It specifically deals with the processes involved in managing the company's cash flow, such as cash flow forecasting, accounts payable and receivable,
bank account management, and short-term borrowing, lending, or investing.
Cash flow management, risk management, funding management, investment management and financial reporting and compliance all fall under the umbrella of treasury management.
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