What is Treasury Management and state its functions?

Treasury management is a system by which an institution monitors and controls the funds available to ensure a maximum yield or savings for the good of the organization.

Functions of Treasury Management

a. Cash Management
This involves the activities of the organization to plan, track, and direct cash account to ensure proper utilization and availability of funds. It provides method for planned and proper uses of cash resources, preventing cash short falls and balancing risk, liquidity, return and cost of cash accounts.

b. Foreign Exchange Management
Conscious decisions are made about foreign currency exchange in order to minimize the associated risk of less than expected returns or higher than expected cost due to fluctuations in exchange rate.

c. Inventory Management
This involves minimizing accumulation of inventories and cost of inventory. It ensures that the best practices are employed to ensure and align with overall company’s financial objectives while meeting operational needs.

d. Risk Management
Every organization in the course of their normal business are faced with different kinds of risks such as liquidity risk, foreign exchange risk, interest rate risk, etc. As such, treasury management tries to navigate through this murky waters to find a way of mitigating against all risks and reduce them to the barest minimum.

e. Assets/Liabilities Matching
There is need to strike a balance between the acquisition of assets and liabilities incurred to get them. Financial mismatch will occur when short term fund is used to finance long term projects as this could lead to liquidity risk and which if not properly handle could lead to insolvency and eventually leading to liquidation.

f. Money market advisory services
Money market is a market for financial claims that are close substitute for money as a result of their ease of conversion to cash. It is a market that facilitates raising of short term funds to bridge the gap between investment or consumption. So treasury management provide advisory services to the organization to ensure they invest in high yielding but low risk marketable securities that could benefit the organization.

g. Fund Management
Treasury management ensures that excess funds available to the organization are not left idle but rather put into productive uses through investment most preferably in short term marketable securities .And when sourcing for funds for the organization, it ensures optimal capital structure is employed in order to maximize the value of the firm and minimize the cost of capital.