Treasury management: Functions, benefits, challenges, and systems

In a world where markets shift overnight and economic shocks ripple across borders, companies can’t afford to leave their finances to chance. Every global business—whether a fast-scaling tech firm or a multinational giant—relies on treasury management to keep cash flowing, risks in check, and operations running smoothly.

Without a strong treasury function, a company can be blindsided by currency swings, liquidity crunches, or unexpected interest rate spikes. Without real-time visibility into cash, even a profitable company can struggle to pay its bills. And when financial volatility hits—whether from inflation, supply chain disruptions, or geopolitical crises—businesses without a solid treasury strategy find themselves scrambling.

Treasury management isn’t just back-office accounting. It’s the difference between financial stability and chaos. So, the real question is: Is your company in control, or just hoping for the best

What is treasury management?

Treasury management is the strategic oversight and administration of an organization’s financial resources to ensure liquidity, optimize cash flows, manage financial risks, and support overall financial stability. It encompasses cash management, investment strategies, funding decisions, risk mitigation (such as interest rate and currency risk), and financial planning.

In plain speak, treasury management is about making sure a company has the cash it needs to keep running smoothly while putting any extra money to good use. It covers handling day-to-day cash flow, making payments, collecting money owed, and deciding where to keep funds for safety and growth. Treasury management also involves planning ahead to avoid financial surprises, managing currency swings or interest rate changes, and making sure the company can always pay its bills. In short, it’s about keeping money flowing in the right direction at the right time.

Core functions of treasury management

• Cash management: Handling a company's daily cash flows—ensuring there’s enough cash to cover expenses while putting excess funds to good use. Maintain smooth operations, avoid cash shortages, and maximize returns on idle cash. Depending on the company’s treasury strategy, maturity and technical proficiency cash management can be either centralized or decentralized:
  • Centralized: All cash is managed from a single location, improving control, visibility, and efficiency.
  • Decentralized: Each business unit manages its own cash, offering flexibility but potentially reducing efficiency.
• Liquidity management: Ensuring the company has enough readily available funds to meet its obligations while minimizing idle cash. Liquidity management aims to keep the company financially stable and reduce unnecessary borrowing costs. Common strategies to liquidity management include utilizing multi-currency cash pooling and in-house banking:
  • Cash pooling: Consolidating cash from different accounts or subsidiaries to improve liquidity and reduce interest costs.
  • In-house banking: Acting as an internal bank for subsidiaries, managing funding centrally and reducing reliance on external banks.
• Cash forecasting: Predicting future cash flows to ensure the company can meet obligations and make informed financial decisions. Cash flow forecasting aims to improve planning, avoid shortfalls, and optimize cash usage. Depending on the company’s requirements cash forecasted either in short-term or long-term basis:
  • Short-term: Focuses on daily or weekly cash needs.
  • Long-term: Looks at broader financial planning and investment strategies.
• Payment management: Ensuring secure, efficient, harmonized, and controlled payments across the organization. Payment management aims to minimize fraud risk, optimize payment workflows, and reduce transaction costs.
  • Payment controls & fraud protection: Implementing workflows, approvals, and security measures to prevent unauthorized transactions.
  • Efficient payment processing: Using automation and standardization to streamline transactions
• Banking management: Overseeing relationships with banks and structuring accounts efficiently to support business needs. Aims to reduce banking costs, ensure smooth transactions, and maintain strong partnerships with financial institutions.
  • Managing global bank relationships: Selecting and maintaining the right banking partners.
  • Account structures: Setting up accounts for efficiency, cost savings, and risk control.
• Risk management & hedging strategies: Identifying and managing financial risks like currency fluctuations, interest rate changes, and commodity price shifts. Aims to protect the company’s financial health from unpredictable market changes.
  • FX risk: Risk from foreign exchange rate fluctuations.
  • Interest rate risk: Impact of changing interest rates on debt and investments.
  • Commodity risk: Fluctuations in raw material prices affecting costs.
  • Hedging strategies: Using financial instruments like derivatives to reduce exposure to these risks.
• Debt & investment management: Managing a company’s borrowing and investment strategies to balance costs and returns. Aims to Secure financing at optimal rates while making the most of surplus cash.
  • Managing credit facilities & financing: Ensuring access to loans and credit lines when needed.
  • Optimizing short-term & long-term investments: Investing idle cash wisely to generate returns without risking liquidity.
• Compliance & regulatory management: Ensuring the company follows financial regulations, tax laws, and reporting requirements. Aims to avoid legal penalties and maintain a strong financial reputation.
• Treasury technology: Using treasury management systems, solutions, tools, and software to automate and streamline treasury operations, improve accuracy, and enhance security. Aims to Increase efficiency, reduce manual errors, and improve decision-making through real-time data.

Roles and responsibilities of treasury management

Treasury management without a dedicated treasury function

In many companies, especially smaller or mid-sized ones, there is no dedicated treasury department. Instead, the finance team absorbs treasury responsibilities, making sure that that critical financial tasks are still handled.

For example, imagine a manufacturing company where the Finance Director oversees treasury-related activities alongside budgeting, financial reporting, and strategic planning. Accounts Payable and Receivable teams handle payments, collections, and bank reconciliations, while a Financial Analyst tracks cash flow, prepares forecasts, and monitors financial risks. Investment decisions and debt management fall to senior finance leadership, who must also maintain strong banking relationships and ensure compliance with regulations.

Although treasury-specific expertise may be lacking, the work of treasury management must still get done. Without a structured treasury function (or tools to support the work) these responsibilities can easily turn fragmented, and cause the risk of inefficiencies, cash shortfalls, compliance issues, or missed investment opportunities to increase. As the company grows, the need for a specialized treasury function becomes more apparent.

Key benefits of treasury management

• Improved cash flow management: Treasury management aims to ensure that funds are used efficiently, and short-term obligations are met, while the interest-rate-increasing need of emergency borrowing is reduced.
• Reduced financial risk: Treasury management prevents losses from market volatility through hedging strategies by mitigating exposure to foreign exchange, interest rate, and liquidity risks.
• Increased profitability: Optimizes cash utilization, minimizes, unnecessary borrowing costs, reduces idle funds, and maximizes investment returns.
• Enhanced decision-making: Treasury management provides real-time visibility into cash positions, enables proactive financial planning and helps senior management make data-driven investment and funding decisions.
• Increased efficiency and cost savings: Treasury management aims to automate manual treasury tasks and optimize payment structures to reduce transaction fees and banking costs.
• Stronger banking and investor relationships: Treasury management improves negotiations with banks for better loan terms and lower fees. It also enhances creditworthiness and investor confidence through strong liquidity management.
• Better forecasting and financial planning: Treasury management enhances cash flow forecasting accuracy and reduces the risk of liquidity shortages. It also supports long-term financial strategy with reliable projections.
• Regulatory compliance and tax optimization: Treasury management ensures adherence to financial regulations but aims also to optimize tax liabilities through effective structuring of cash flows and investments.
• Fraud prevention and security: Strengthens payment controls and transaction monitoring to prevent fraud.
• Improved working capital management: Treasury management speeds up receivables collection and optimizes payables timing but also ensures efficient use of internal funds.

Challenges in treasury management

1. Struggles with multi-currency and cross-border transactions: Without a centralized treasury function or a system to support it, tracking and reconciling foreign currency transactions becomes a manual and time-consuming task. Treasury teams must constantly check fluctuating exchange rates, manage multiple bank accounts in different countries, and manually adjust for foreign exchange (FX) gains or losses.
2. Difficulty managing liquidity and cash flow: Treasury teams that rely on spreadsheets and manual reports to track cash balances across multiple accounts, often work on outdated or incomplete data. Without real-time visibility, businesses risk either running short on cash for critical payments or holding excessive idle funds that could be better invested.
3. Fragmented banking relationships and manual payments: Managing multiple banking partners without a unified treasury management system means treasury teams must log into separate online banking portals, track balances manually, and process payments through different workflows. This fragmented approach causes inefficiencies, delays, and an increased risk of unauthorized transactions.
4. Risk management gaps due to disconnected data: Identifying and mitigating financial risks, like interest rate volatility, FX exposure, and credit risk, becomes difficult when data is scattered across multiple spreadsheets and departments. Treasury teams aren’t able to react in time to market changes, which leads to costly losses or missed hedging opportunities.
5. Regulatory compliance burdens: Treasury managers must keep up with evolving financial regulations, tax laws, and reporting requirements across different jurisdictions. Without automated compliance tracking, teams manually compile data, which increases the risk of errors, missed deadlines, and potential fines.
6. Cash forecasting inaccuracy: Forecasting future cash flows involves pulling data from multiple sources, such as accounting, sales, and procurement. Without an integrated system, forecasts rely on outdated or inconsistent data, making it harder to predict short-term cash needs and plan investments or borrowing effectively.
7. Increased fraud risk and lack of payment controls: Manual payment approval processes make it easier for unauthorized transactions or fraudulent activities to go undetected. Lack of proper segregation of duties, audit trails, and real-time monitoring increases vulnerability to internal fraud and cyber threats.
8. Inefficiencies in investment and debt management: Managing debt facilities and optimizing investments require real-time insights into cash positions and market conditions. Without a system to consolidate this information, treasury teams struggle to make informed borrowing or investment decisions, potentially missing opportunities or incurring unnecessary costs.
9. Difficulty accessing capital on favorable terms: Companies that lack centralized treasury management struggle to present a clear financial picture to banks and investors. This can result in higher borrowing costs, less favorable credit terms, and limited access to capital when needed.
10. High operational costs and time-consuming processes: Treasury teams spend excessive time manually compiling reports, reconciling accounts, and verifying transactions. These inefficiencies drive up operational costs and reduce the time available for strategic financial planning.
11. Poor stakeholder communication and financial transparency: Treasury teams must provide senior management, investors, and auditors with clear financial insights. Without a centralized source of truth, reports are often outdated, inconsistent, or incomplete, making it harder to provide accurate updates and inform strategic decisions.

Treasury management maturity: Treasury technology utilization

Comparing treasury system features, tools & solutions

Selecting the right treasury software

Selecting the right Treasury Management System (TMS) requires careful planning to align with your company’s needs, goals, and existing technology landscape. Follow these steps to ensure a structured decision-making process:

1. Define your treasury goals: Before evaluating systems, clarify what you want to achieve:
   • Improve cash visibility and control
   • Automate treasury processes to reduce manual work
   • Enhance risk management and compliance
   • Streamline bank relationships and payments
   • Optimize liquidity, investments, and debt management
2. Assess your current gaps: Analyze gaps in your current treasury operations to determine what needs improvement:
   • Automation Level: How much of your treasury work is manual? What processes need automation?
   • Skill Gaps: Does your team have the expertise to use advanced treasury tools?
   • Technology Gaps: Are your current systems outdated or lacking integration with banks, ERPs, and other financial platforms?
3. Identify the features you need: List the must-have features based on your business needs. Key features to consider:
   • Treasury accounting – Managing treasury-specific financial transactions
   • Treasury payments – Automating payments while enhancing security
   • Cash positioning & visibility – Real-time tracking of cash balances
   • Investment & debt management – Monitoring financing structures and investments
   • FX & interest rate risk management – Hedging strategies for foreign exchange and rate risks
   • In-house banking – Managing internal funding between business units
   • Intercompany netting – Consolidating internal transactions to reduce external payments
   • Bank administration & relationship management – Centralizing bank account management and fee monitoring
   • Cash flow forecasting – Predicting short-term and long-term liquidity needs
4. Consider system automation & integration
   • Automation capabilities: Identify which treasury tasks can be automated (e.g., cash forecasting, payments, reconciliation).
   • Integration requirements: List all external systems the TMS must connect with, such as:
     • Banks ERPs (e.g., SAP, Oracle)
     • Accounting software
     • Market data providers (for FX & investment management)
5. Decide on an implementation approach. Choose between:
   • All-in-one implementation – A full rollout of all functionalities at once (best for smaller companies or those with simpler treasury needs).
   • Phased implementation – Adopting features in stages (best for complex organizations or those upgrading from legacy systems). Consider rolling out:
     • Function by function (e.g., starting with payments, then moving to forecasting)
     • Entity by entity (e.g., deploying in one region before expanding globally)

Conclusion: Treasury management—adapt or fall behind

Treasury management is no longer just about tracking cash and mitigating risk. Treasury management is about driving strategic value, ensuring resilience, and leveraging technology to stay ahead in a rapidly evolving financial landscape.

The financial world is shifting—interest rates fluctuate, global crises disrupt markets, and new technologies redefine treasury’s role. Treasury professionals must embrace change and remain proactive rather than reactive. Those who fail to adapt risk inefficiency, compliance failures, and financial instability. The choice is clear: Evolve, automate, and lead—or get left behind.