The final, long-term goal of almost every profit company is to make more and more money continually. To achieve that goal, treasury management has to drive value creation through the maximization of cash liquidity. What you have to implement as a company is a tested, quality treasury strategy which will help cash flow management and financing. Treasury management, as well as a good treasury strategy, will ensure that your company always has the money it needs. Also, it will help your organization work with that money in day-to-day business activities. In this article, we will show you five essential tips on how to improve your treasury strategy.
Improve your cash flow forecasting
Always analyze your cash requirements and cash forecasts against possible negative scenarios. There is a huge variety of these scenarios, and you have to be well prepared. If you have offices in many locations throughout your continent or overseas, try to assess all the adequacy and rigor of your information sources. The best thing you can do is to use a robust treasury management system. These tools will warn you against potential liquidity gaps, and also, they will identify optimal funding options.
Prepare for all possible risks
A great treasury strategy requires you to be prepared for all negative scenarios and potential risks that could happen. Identify and mitigate all possible risks, whether they are about credit, interest rates, currency or liquidity. When you better understand your firm’s exposure to these risks, you will be able to react appropriately to them when they occur and find the best corporate treasury solutions. On top of that, consider that changes in your business plan or business strategy could change the risks that you are exposed to. Therefore, you have to review and update your risk protection plan regularly.
Make sure your governance practices are strong
You might think that the most significant risks are external, but the truth is the opposite. The most considerable treasury risks are internal. Those inadequate operational policies and controls often lead to mismanagement and fraud, and in the end, to a massive loss of the company’s value. All vital money functions have to be correctly segregated and overseen in order to avoid any wrongdoing or error. Finally, test your treasury practices each day. Do all necessary tests for worst-case scenarios, especially for hypothetical power failure. These tests are great because they can quickly reveal any operational weaknesses. In the end, regular testing is the first precondition for an outstanding treasury to become a great one.
Practice quality leadership
Strive for leadership excellence, whatever your role is. Whether you are providing financial reports to other management team members or overseeing the operations of your team, always try to be the best. When you learn these skills in a normal working situation, you will know how to motivate your team in crises. You will know how to create an engaged team and how to handle the problem when it comes. When it comes to treasury strategy, always think about negative scenarios and be the one who knows what has to be done in order to solve the issue.
Create your external professional relationships
You need quality external professionals and quality relationships the same way you need a great internal team for treasury success. For greater success, you have to create and maintain good relations with bankers, lawyers, accounting auditors, tax advisors, etc. To receive the best possible service from them, try to be open and transparent as much as possible. Tell them what your business is all about, what your long-term goals are and why it is beneficial for both sides to create a business relationship. The better they understand your needs, the better their assistance will be. With mutual benefits, of course.
Alongside the best treasury strategy, it is highly recommended to use robust management tools to higher your chances for maximum benefit. They are super helpful for automating your processes and to deliver the best results and information. And finally, these tools will help people working in the management of your treasury to achieve the highest results and maximum benefits.