How can you use treasury management to improve your liquidity?

Your cash cycle is like the heartbeat of your business the time it takes for money to circulate from your bank account to customers and back again. A shorter cash cycle means more financial fluidity for your business. Accurate and regular cash flow forecasting sets the stage, predicting the financial rhythm. Encourage swift transactions by offering incentives for early payments. Transition to digital invoicing and payments for a more streamlined process. Negotiate favorable terms with suppliers, fostering a beneficial partnership. Trim excess by reducing inventory levels and optimizing accounts payable and receivable, fine-tuning your financial operations.

As much as you put efforts in your budget and forecast plans you got good product availability (volumes on time)in the market and minimum inventory levels(Raw materials and product) -this for sure will positively impact the treasury liquidity and flow.

In addition to seeking higher returns through strategic investments, effective treasury management can also serve as a crucial risk mitigation tool for businesses. By diversifying surplus cash across different asset classes and maturities, a company can create a buffer against unforeseen economic downturns, market fluctuations, or unexpected expenses. This diversification strategy aims for ideal returns but also enhances financial resilience. While higher returns are desirable, maintaining liquidity ensures a company's ability to seize strategic opportunities, cover immediate financial needs, or navigate unforeseen challenges. Striking the right balance between returns and liquidity becomes a key consideration in treasury management.

By incorporating a treasury management system (TMS), businesses can automate various financial tasks, making processes more efficient, reducing errors, and increasing overall visibility into financial operations. The TMS acts like a digital hub, connecting with accounting, banking, and other systems to provide real-time data, analytics, and reporting. This not only saves time but also enhances the accuracy of financial information. Furthermore, the integration of application programming interfaces (APIs) allows the TMS to interact with external platforms and services, facilitating faster and more secure transactions.

Running a lean department is a great strategy in Treasury in tandem with automating, delegating and eliminating tasks/processes. Treasury is typically a cost center, so a delicate balance must be struck between headcount and workload.

Liquidity management is a functional subset of overall treasury management with a number of factors determine its efficacy which include the form and function of cash - i.e., availability, accessibility and utility - as well as restrictions and contingencies. Effective liquidity management, therefore, requires a holistic approach that includes these considerations together with other functions aspects from cash management, to planning along with the enablers like systems and solutions (whether through banks or other services providers). The final more corporate consideration is the treasury policy that governs investments and the capital structure of the organization.