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Small Business Owner’s Guide to Treasury Management

Treasury management is one of the most important functions of a small business, as it essentially encompasses all aspects of managing your organization’s money. A small business owner’s guide to treasury management includes processes and activities in cash flow forecasting, investing, banking and invoicing, risk management, etc.

Treasury management is crucial to business operations because it allows you to optimize financial resources as well as analyze and manage financial risks. It’s important that your treasury management department ensures that your organization has enough cash flow to address short term needs as well as the right funds to invest in future opportunities.

The Primary Components of Treasury Management

Treasury management is all about planning, organizing, and controlling an organization’s financial position. This includes:

  1. Forecasting cash flow — Cash flow forecasting allows an organization to predict its financial position over a period of time. This usually includes “scenario planning”, which allows teams to simulate different cash projection scenarios to envision what each would mean for the business. Overall, cash flow forecasting can help you foresee future surpluses or shortages to make more effective decisions for the business.
  • Proactive risk management — Cash flow projections also play a large role in minimizing financial risksby enabling you to predict what future cash flows will look like. Proactive risk management also includes analyzing market risk factors, industry trends, and other potential risk indicators.
  • Liquidity management — The position of your liquidity is the window to understanding your organization’s overall financial health. With the right analysis practices, you can ensure that the company is continually able to meet both short- and long-term obligations. Cash flow forecasting comes into play here as well, in addition to focusing on working capital.
  • Investments — The treasury management department has a responsibility to enable company growth by using financial data from its various systems to make important investment decisions and deliver value to both the business and any shareholders it may have.

What are the Benefits?

The benefits of treasury management vary by organization, but they include improved cash flow, reduced risk, increased efficiency and profitability, improved decision making, and cost savings. A proper treasury management strategy enables many manual processes to become automated and reduces the risk of error, and increases visibility into both short- and long-term financial position for more strategic decision making.

If you’re looking for an extra hand when it comes to planning a treasury management strategy, our bankers and treasury management team at Republic Bank are ready to help. Reach out to us today at 800-526-9127 or visit our Treasury Management page.

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