The treasurer and cash management

There is no standard approach to treasury and cash management. In continental Europe many companies combine the treasury, risk and liquidity functions with the controller or finance director role. In the US the cash management function is usually managed by the treasurer (who often has a treasury or banking background), who reports to the chief financial officer (who has an accounting background). In the UK and parts of Asia the group treasurer (often a qualified accountant with AMCT or MCT qualifications) usually reports to the finance director or the Board.

The fact that the terms treasury and cash management are sometimes used interchangeably, depending on the company and the country, emphasises the growing role of the cash manager and increasing responsibility for many treasury functions. In this chapter we describe the role of the treasurer, which includes the cash management and cash management-related functions. When referring to `treasury’ or ‘treasury functions’ we refer specifically to those related to cash management and not to the broader definition which can include the roles of corporate finance, risk management, capital markets and funding, leasing and insurance.

The five financial disciplines that describe the treasury profession in its broader context are:

Corporate financial management

  • accounting and reporting business valuation capital structure
  • corporate strategy
  • investment appraisal legal documentation regulation and law
  • taxation

Capital markets and funding

  • asset and project finance
  • bank lending
  • credit ratings
  • debt capital markets
  • equity
  • trade finance

Cash & liquidity management

  • cash flow forecasting
  • cash management
  • payment and clearing systems
  • short-term liquiditybusiness and operational risk

Risk management

  • commodity risk
  • credit risk
  • exotic risk
  • foreign exchange
  • interest rate risk
  • managing risk
  • pensions risk

Treasury operations and controls

  • control and reporting
  • policy and objectives
  • technology and systems
  • treasury organisation
  • the treasury professional

The treasurer and cash management

Focusing on the skills required to manage the treasury and cash management functions, however, the treasurer’s role has been evolving over many years, and can still be a very different job from company to company. Some treasurers spend most of their time managing cash, while others concentrate on risk. Increasingly treasurers are becoming managers of ‘net working capital’  rather than cash managers in the traditional sense. One of the biggest developments has been the impact of globalization and the speed with which information is received and processed. Ten years ago it was common for companies to have a treasury function in each country. Today, technology has enabled greater centralization and it is more usual to see regional or even global treasuries working with real-time information.

The differences between the treasury roles in different companies can be ascribed to differences in:

  • size
  • industry
  • country of domicile
  • level of international versus domestic business
  • corporate culture
  • personal style and experience of the treasurer comorate history
  • life cycle/stage of development nature of business

The role of the treasurer depends very much upon the type of organisation. An engineering company may require a specialist in long-term debt/capital financing with taxation skills; a retail or consumer organisation might need a treasurer with transactional skills such as those required to negotiate with transportation companies, net working capital expertise to accelerate the collection/receivables process, or the ability to assess the risk of different payment methods.

In some companies, additional non-treasury responsibilities can be assigned to the treasurer. For example, one airline regards the treasury function as essentially one of risk management; therefore, it is not surprising that this company’s treasurer is also responsible for insurance. Nor is it surprising that the management of commodity risk becomes important in industries which are closely tied to commodities, such as the chemical industry, or where commodities form a large part of the cost base (i.e. airlines or confectionery). It is also fairly common, particularly in those companies where the treasury has developed from the chief accountant function, for an accountancy-trained treasurer to be given additional responsibility for corporate tax.

The treasurer carries a dual role which is both strategic and operational. While being responsible for the above functions, the treasurer usually also manages the channels (treasury systems, operations and control) through which they are delivered.

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