What is Corporate Treasury? A practical guide

πŸ’² We simplify Corporate Treasury Concepts - πŸŽ™οΈ From the podcast Corporate Treasury 101

What is Corporate Treasury? A practical guide

Are you feeling overwhelmed by the complex world of corporate treasury? Fear not because we have the ultimate solution that will simplify your understanding and revolutionize your approach to treasury management. Get ready to embark on a journey that caters to your unique needs, regardless of your industry or financial background. Our comprehensive guide to the corporate treasury is here to demystify the process and empower you with the knowledge and tools to take control of your business’s financial health. Say goodbye to confusion and hello to financial success!

Our comprehensive guide covers everything from unraveling the intricacies of cash flow management to unlocking the secrets of risk mitigation and strategic decision-making. Prepare to explore real-life examples, insightful case studies, and practical tips that will equip you with the knowledge and skills to make informed financial choices. Get ready to embark on a journey of discovery, anticipation, and excitement as we unlock the power of corporate treasury together. Are you ready to leap?

Also, click here to read about the critical role of treasury centers in today’s complex financial landscape.

What is Corporate Treasury? Explained for a Ten-Year-Old

Let’s start by understanding what treasury means for small companies, and then we’ll delve into the corporate treasury.

Treasury for Small Companies

In a small company, treasury refers to their money at a particular moment, either in cash or in their bank account. It’s important to remember that this money isn’t necessarily all profits, and the company can’t just use it in any way they want.

Balancing Inflows and Outflows

When you run a small business, you receive money from your clients over a certain period. These could be payments for products or services you provide. However, you also have various short, mid, or long payments. These can include paying suppliers, employee salaries, and taxes, among other things.

Taking Care of Treasury

Small business owners often say they need to take care of their treasury. What does that mean? Well, it means they have to make sure that two important things happen:

  1. Paying What They Owe: They need to check that everyone who owes them money has paid on time. This ensures they have enough funds to fulfill their financial obligations, such as paying suppliers, salaries, and taxes.
  2. Receiving What is Due to Them: They also need to ensure they receive the money owed within the agreed time frame. This can include payments from clients for the products or services they have provided.

So, What is Corporate Treasury?

Now that we understand how treasury works for small companies let’s move on to corporate treasury. Corporate treasury is similar in concept but on a larger scale. It involves managing the money and financial activities of a big company or organization.

Expanded Responsibilities

In the corporate treasury, the scope expands beyond just managing cash and payments. It involves handling a wide range of financial functions, such as managing investments, handling foreign currencies, managing risks, and optimizing the company’s overall financial position.

The Role of Corporate Treasurer

A big company often has a dedicated team or department called the corporate treasury, led by a corporate treasurer. Their role is to ensure the company has enough funds to operate smoothly and to make strategic financial decisions.

Key Responsibilities of Corporate Treasury

  1. Liquidity Management: Corporate treasury ensures the company has enough cash or easily accessible funds to cover its daily operations and financial obligations.
  2. Cash Flow Forecasting: They analyze and predict the company’s future cash flows to ensure enough money is available when needed and to plan for any potential shortfalls.
  3. Financing and Capital Structure: Corporate treasury manages the company’s debts, loans, and financing strategies, deciding on the best ways to fund the company’s operations and investments.
  4. Risk Management: They identify and mitigate financial risks that could impact the company’s stability or profitability, such as interest rate fluctuations, currency risks, or market uncertainties.
  5. Investments: Corporate treasury handles the company’s investment decisions, including managing surplus funds and optimizing returns while considering the company’s risk tolerance and financial goals.

So, corporate treasury is like an advanced version of managing money, but on a much larger scale. It involves overseeing the financial activities of big companies, ensuring they have enough funds, managing risks, and making strategic financial decisions. It’s a crucial function that helps companies stay financially healthy and achieve their goals.

How Does Treasury Work for a Restaurant? A Practical Example

Let’s dive into an example that everyone can relate to: a restaurant in the city center of our beloved city, Brussels. Analyzing this restaurant’s business from a treasury perspective allows us to grasp the concept more effectively.

Charges: What the Restaurant Needs to Pay

In any business, various expenses need to be paid. For this restaurant, let’s simplify and focus on a few key charges:

  1. Ingredients: The restaurant must purchase the ingredients necessary to make their dishes.
  2. Salaries: In this example, two employees, a chef, and a waiter/waitress, must be paid.
  3. Rents: The restaurant pays rent for the space it occupies in the city center.
  4. Other Charges include additional expenses like electricity, taxes, and other miscellaneous costs.

Business Revenue: What the Restaurant Receives

Now let’s look at what the restaurant receives as income. In this case, the main source of revenue is the money received from the customers who eat at the restaurant.

Timing of Payments

To understand treasury management better, we need to consider the timing of payments. In this example, the customers pay their bills immediately after enjoying their meals. So, the restaurant receives the money upfront before paying its suppliers.

On the other hand, salaries, rent, and other charges are usually paid at different intervals. For instance, salaries and rent may be paid monthly, while other charges may be incurred quarterly or annually.

Positive Treasury Management

In this scenario, the restaurant’s treasury is considered positive, meaning it has more cash inflow than outflow. Managing positive treasury is relatively easier because cash is always available in the bank account or cash register.

Ensuring Proper Cash Flow

However, it’s essential to manage the cash flow effectively. Here are a few key steps involved:

  1. Covering Expenses: A portion of the revenue generated must be allocated to cover ingredient expenses, ensuring enough money to purchase the necessary supplies.
  2. Reserving for Rent and Other Charges: The restaurant should set aside a specific amount to meet rent and other regular charges. This ensures they have the funds ready when these payments are due.
  3. Remembering Taxes: It’s crucial not to forget about taxes. The restaurant needs to allocate funds to cover tax obligations and ensure compliance.

Using this example of a restaurant’s treasury management, we can understand how it works for small businesses. The key is to balance the income received from customers with the expenses that need to be paid. Proper cash flow management, timely payments, and budgeting for various expenses are essential to keep the treasury in good shape.

Take-home step: If you ever start your own business, it’s crucial to carefully track your income and expenses, ensuring you set aside money for essential payments like salaries, rent, and taxes. Regularly reviewing your cash flow and adjusting will help you maintain a healthy treasury.

How Does Treasury Work When Clients Don’t Pay Immediately?

Let’s explore what happens when the payment process is the other way around, where clients don’t pay immediately. This scenario can present some challenges for managing treasury effectively.

The Case of Wholesalers

To understand this concept better, let’s consider the example of our restaurant, but this time we’ll put ourselves in the shoes of a company that sells ingredients. In this case, we’ll act as a wholesaler supplying the restaurant with the necessary raw materials.

Delayed Payments from Clients

In this scenario, instead of receiving immediate payments from clients, we allow them a certain number of days to pay us after we deliver the ingredients. Let’s say the clients have ten days to make the payment. This gives them time to use the ingredients, transform them into delicious dishes, and generate revenue before settling their bill.

Time Sensitivity with Suppliers

While clients have the luxury of delayed payment, our suppliers (in this case, farmers) may be unable to wait for their money. They typically expect to be paid promptly after we deliver the raw ingredients. They might have their financial commitments and cannot afford to wait for extended periods.

Challenge: Paying Suppliers Before Receiving Payment

Due to the timing misalignment between receiving payments from clients and paying suppliers, we face a challenge. We need to find a way to pay our suppliers or fulfill other financial obligations before receiving the money from our clients.

Importance of Supplier Payment

It’s essential to prioritize paying suppliers on time. If we fail to do so, our relationship with them may suffer, and they might refuse to continue doing business with us. In extreme cases, consistently struggling to meet our financial obligations could lead to bankruptcy.

Addressing the Timing Gap

Managing treasury effectively in this situation requires finding a solution to bridge the timing gap between paying suppliers and receiving client payments. While this may delve into more detailed strategies that we can explore in future articles, here’s a general approach:

  1. Cash Flow Planning: We need to clearly understand our cash flow, including the expected inflows and outflows. This helps us anticipate when we’ll have funds to pay suppliers and plan accordingly.
  2. Establishing Credit Terms: We can negotiate credit terms with our suppliers, seeking an agreement where we have a certain number of days to pay them after receiving the goods. This allows us to align the payment timing better with the inflow of funds from our clients.
  3. Building Reserves: We can establish reserve funds to ensure we have sufficient funds to cover supplier payments before receiving client payments. This involves setting aside a portion of our revenue or profits specifically for this purpose.

When clients don’t pay immediately, managing treasury becomes more complex. We must ensure timely payments to suppliers, even before receiving client payments. By planning cash flow, negotiating favorable credit terms, and building reserves, we can overcome these challenges and maintain a healthy financial position.

Take-home step: If you are in a business where clients don’t pay immediately, plan your cash flow effectively. Negotiate credit terms with your suppliers, allowing for more favorable payment timing, and consider building reserves to ensure you can fulfill your financial obligations on time.

The Role of a Treasurer: Connecting University Societies to Corporate Treasury

That is an interesting point about the role of a Corporate Treasurer, especially in the context of university societies. Let’s explore how this role relates to the corporate world and its connection to corporate treasury.

University Societies and Nonprofit Associations

When you were at university, you might have set up a society and having a treasurer. This treasurer’s role was vital for managing the financial aspects of the association. It’s important to note that this context often applies to nonprofit associations or student organizations, where they form a moral entity to pursue specific activities.

The Role of a Treasurer in Nonprofit Associations

Certain key positions are typically mentioned in the article of incorporation, which is a legal document establishing the association’s existence. These include the president, secretary, and treasurer. While the president oversees the overall operations and the secretary handles administrative tasks, the treasurer is crucial in managing the association’s finances.

Financial Responsibilities of the Treasurer

The treasurer’s responsibilities may include the following:

  1. Opening and Maintaining a Bank Account: The treasurer is responsible for setting up a bank account in the association’s name. They ensure that the account is properly maintained and managed.
  2. Collecting Membership Fees: One of the treasurer’s key tasks is collecting membership fees from the association’s members. This involves tracking payments and ensuring that everyone fulfills their financial obligations.
  3. Managing Financial Obligations: The treasurer handles financial transactions with third parties on behalf of the association. For example, they may pay suppliers for necessary items or settle rental fees for premises used for events or parties.

Importance of Cash Management

Similar to corporate treasury, the treasurer’s role involves managing cash effectively. The treasurer must ensure the association has enough funds to cover its financial obligations. If members don’t pay their membership fees or event tickets, it can create financial challenges and make it difficult to meet expenses.

Transition to Corporate Treasury

The role of a treasurer in university societies serves as a good transition to understanding corporate treasury. In the corporate world, companies also have treasurers who oversee financial management on a larger scale.

Corporate Treasury: A Wider Scope

In the corporate setting, corporate treasury expands beyond managing cash for an association. It involves handling various financial functions, such as liquidity management, cash flow forecasting, risk management, and optimizing the company’s financial position.

The role of a treasurer, whether in a university society or the corporate world, revolves around managing finances and ensuring a smooth cash flow. While the treasurer of a university society focuses on managing funds within the association, corporate treasury takes on a broader scope, influencing the financial health and success of the entire company.

Take-home step: If you find yourself in a role related to managing finances, whether in a university society or an organization, understand the importance of effectively managing cash flow. Take responsibility for financial transactions, ensure timely collection of dues or payments, and maintain a clear record of financial obligations. These practices will help ensure the stability and success of the association or company you are involved with.

What Does a Corporate Treasurer Do? Unraveling the Role

Let’s explore what a corporate treasurer does and how their responsibilities differ from those of a treasurer in a university setting.

Corporate Treasury: Stepping Up in Complexity

As we mentioned earlier, corporate treasury comes into play when companies reach a certain size regarding turnover, number of employees, and other factors. While the fundamentals we discussed earlier still apply, the role of a corporate treasurer involves handling greater complexity and a broader scope of responsibilities.

Managing Finances on a Larger Scale

In a corporate setting, the treasurer’s role expands to managing financial activities across the organization. Let’s examine some key aspects of a corporate treasurer’s responsibilities.

1. Payroll and Employee Payments

While small businesses may have only a couple of employees, corporations often employ thousands worldwide. The corporate treasurer ensures that employees are paid accurately and on time, handling payroll processes efficiently.

2. Supplier Payments and Management

Dealing with suppliers becomes more intricate in a corporate setting. Corporate treasurers manage relationships with numerous suppliers, processing payments promptly to maintain positive business partnerships.

3. Collection of Funds and Cash Flow Management

When dealing with millions of customers, collecting money on time becomes critical. Corporate treasurers oversee the collection process, ensuring that funds are received as expected. Managing cash flow across various regions, currencies, and business units is essential to maintain financial stability.

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Importance of Timely Payments and Reputation

In the corporate world, reputation is crucial. Failing to pay employees, suppliers, or other counterparts on time can tarnish a company’s image and have severe consequences. The corporate treasurer plays a vital role in maintaining the company’s financial integrity and reputation.

Mitigating the Risk of Bankruptcy

By managing the treasury effectively, the corporate treasurer helps safeguard the company from financial troubles. Bankruptcy is a significant risk if funds are mismanaged, or payments are consistently delayed. Therefore, it is crucial to prioritize timely payments and maintain a healthy financial position.

Corporate Treasury as a Strategic Business Partner

As a company grows and treasury becomes more complex, the function of corporate treasury itself becomes significant. When driven properly, the corporate treasurer becomes a strategic business partner, providing valuable insights on financial matters, managing risks, and contributing to the company’s overall success.

The role of a corporate treasurer goes beyond the responsibilities of a treasurer in a university society. Corporate treasurers manage finances on a larger scale, overseeing payroll, supplier payments, cash flow, and more. Timely payments and reputation management are essential to avoid financial crises and maintain the company’s success.

Take-home step: Whether you aspire to become a corporate treasurer or simply want to manage your finances effectively, prioritize timely payments and reputation management. Build a solid financial foundation, stay organized, and seek opportunities to enhance your financial knowledge. These steps will help you navigate the complexities of treasury management and contribute to your long-term financial well-being.


In conclusion, understanding corporate treasury is no longer an insurmountable challenge. With the knowledge and insights gained from this comprehensive guide, you can navigate treasury management’s complexities with confidence and clarity. By embracing the principles and strategies outlined here, you have the power to transform your small business’s financial health and drive it toward success.

Remember, the key lies in taking action. Implement the take-home steps provided throughout this article to ensure your treasury management practices are effective and sustainable. Carefully track your income and expenses, prioritize timely payments, and plan for future financial obligations. Regularly review your cash flow, adjust as needed, and seek opportunities to optimize your financial position.

While the world of corporate treasury may at times seem daunting, you now possess the tools to overcome any challenges that come your way. Embrace this knowledge and use it to your advantage. As you continue on your business journey, remember that the principles of corporate treasury are not reserved for large corporations alone. They apply to businesses of all sizes, including your own.

So go forth, confident in your understanding of corporate treasury, and let its principles guide you towards financial health and success. With your newfound knowledge, you are well on your way to unlocking the full potential of your business. The world of treasury management awaits, and you are ready to conquer it.

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