The treasury management (TM) department is typically responsible for managing a bank’s financial resources, including its cash and investments, as well as its financial risks. In a typical bank’s hierarchy and organization, the treasury management department is typically part of the finance division and reports to the chief financial officer (CFO).
The treasury management department may also have a dotted-line reporting relationship to other parts of the bank, such as the risk management department or the business lines, depending on the specific responsibilities of the department and the needs of the bank. In general, the treasury management department plays a critical role in helping the bank to manage its financial resources and risks effectively, and to support the overall financial goals of the bank.
The finance division is responsible for a wide range of financial functions, and can vary depending on the size and complexity of the company, but some common activities include:
- Managing cash flow: This involves forecasting future cash needs and ensuring that there are sufficient funds available to meet the company’s financial obligations. This can include managing accounts receivable and accounts payable, as well as monitoring and managing the company’s debt.
- Investing excess cash: If a company has excess cash that is not needed to meet its immediate financial obligations, it may invest this cash in low-risk, short-term investments such as money market funds or certificates of deposit.
- Managing financial risks: This involves identifying and managing financial risks that could impact the company’s financial performance, such as foreign exchange risk, interest rate risk, and credit risk. This can include implementing risk management strategies such as hedging or diversifying investments.
- Managing debt: This involves managing the company’s debt in a way that is consistent with its overall financial goals and risk appetite. This can include negotiating favorable terms with lenders, monitoring debt levels and covenants, and refinancing debt when appropriate.
- Managing foreign exchange: If a company operates in multiple countries or conducts business in foreign currencies, it may need to manage its foreign exchange exposure in order to minimize the impact of currency fluctuations on its financial performance. This can include implementing strategies such as hedging or using currency forwards.
- Providing financial reporting and analysis: Treasury management activities often involve the preparation of financial reports and analysis to provide insights into the company’s financial performance and assist with decision-making. This can include the preparation of cash flow statements, balance sheets, and other financial reports.
In order to fulfill this role effectively, a mid-market treasury management department may use a variety of tools and technologies, including:
- Treasury management software (TMS): This type of software is designed to help treasury management departments manage their financial resources and risks more effectively. Features may include cash flow forecasting, debt management, risk assessment, and investment management.
- Bank portals: Many banks offer online portals that allow treasury management departments to access financial information and perform transactions online, such as initiating wire transfers or making investments.
- Financial modeling and analysis software: This type of software is used to create financial models and perform analysis to help treasury management departments make informed decisions about financial matters.
- Risk management tools: These tools may include software or other technologies that help treasury management departments identify, assess, and manage financial risks, such as foreign exchange risk or credit risk.
- Financial planning, analysis, and budgeting software: This type of software is used to create financial plans, projects, and budgets, and to track actual results against the plan.
Treasury management software
There are many different TMS platforms available on the market, and the most suitable platform for a particular company will depend on its specific needs and requirements. Some popular TMS platforms include:
When choosing a TMS, there are several considerations that companies should take into account, including:
- Functionality: It is important to choose a TMS that has the features and capabilities that are required to meet the company’s specific needs and requirements.
- Scalability: The TMS should be able to scale up or down as the company’s needs change over time.
- Integration: The TMS should be able to integrate with other systems and technologies that the company uses, such as accounting software or enterprise resource planning (ERP) systems.
- User-friendliness: The TMS should be easy to use and should require minimal training for users.
- Support and maintenance: The TMS provider should offer ongoing support and maintenance to ensure that the software is functioning properly and to address any issues that may arise.
- Cost: The TMS should be cost-effective and provide a good value for the company.
In addition to these tools, mid-market treasury management departments may also use other resources such as financial advisors, consultants, or external data sources to help them manage the financial resources and risks of the company effectively.