Introduction
This is the first of a series of short articles on Treasury for Non-Treasurers. It has two aims:
1. To explain Treasury to non-treasury stakeholders. These stakeholders include students and young accountants thinking of joining the profession and other functions in organisations, suppliers, associated members such as journalists and more, all the way up to CFOs and board members.
2. To help members of the Treasury profession explain what we do in words that non-treasurers will understand!
It will take many articles to cover all aspects of the Treasury. The aim is to publish a new article every week.
First Article: What is Treasury?
How often have we heard that question? I have often cringed on hearing the answer: “Well, we work with banks. We’re responsible for liquidity and risk management…”
This is not WHAT IS TREASURY. It’s WHAT TREASURY DOES!
So, for the many who are interested, let’s start with a real explanation:
1. Treasury is responsible for ensuring the organisation avoids insolvency. Many functions are involved with setting terms of trade and with collections and payments. Treasury is the only function responsible for bridging the gap between outflows and inflows.
2. Treasury is responsible for managing the associated gain and loss implications. Borrowing and lending—and different ways of paying and receiving – create major risks of losses or, conversely, opportunities for gain. These have a major impact on profitability. BUT, fellow treasurers, lest we forget, we only SUPPORT the company’s profitability, we don’t make it. When we get stuck into our banking products, we often forget that (pooling?)
3. Treasury is responsible for managing its own operational costs. Obvious, yes. But it leads to an interesting question that people need to know to understand their own treasuries. Why are some treasuries set up as profit centres and others as breakeven and cost centres? That’s a subject for a future article 😉
4. Treasury is responsible for its alignment with company strategy. Another obvious comment? Yes, but again… Many people say Treasury is part of finance, with the implication that treasury is in lockstep with other finance functions like accounting and FP&A/consolidation. This is not true. Treasuries often have a difficult relationship with other financial functions. More on this later too 😊
Follow this link to find out what Treasury is, in Non-Treasurers’: Treasury for Non-Treasurers: What is Treasury
The next article will answer the question: Is Treasury a strategic Function?
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