While the Treasury function is a specialized role in most large corporations, it is usually the direct responsibility of the CFO in a middle market business, and it is a critical one. Many otherwise successful companies with great products or services underachieve or even fail due to their inability to forecast cash flows and arrange financing in a way that allows the company to take advantage of opportunities and minimize the impact of threats. The objective of the Treasury function is to:
- Manage the company’s cash and liquidity in relation to short- and long-term working capital requirements and to invest excess cash;
- Track cash flow and forecast needs;
- Meet with bankers to review credit adequacy, keep them informed of performance and in compliance with credit agreement covenants;
- Improve accounts receivable collections performance;
- Invest excess cash;
- Improve Accounts Payable management.
At the very least, proper management of the Treasury function can save middle market companies thousands of dollars per year in interest alone. At it’s best, it can be the difference between a successful company that continues to grow and one that heads in the other direction.