Special Issue for International Conference on Business Research,

Dept of Commerce, Faculty of Science and Humanities

SRM Institute of Science & Technology, Kattankulathur, Tamilnadu.

A STUDY ON THE ROLE AND IMPORTANCE OF TREASURY MANAGEMENT

SYSTEM
Dr. S.TAMILARASI1,Mrs. V. RENUKA2
1
Associate Professor, department of Commerce, FSH,SRMIST
2
Research Scholar, Department of Commerce, FSH, SRMIST
-

INTRODUCTION management of interest-rate and exchange-rate risks

and, finally, banking management (Charro& Ortiz,
Treasury management is the creation and governance 1996; López, 2003).
of policies and procedures that ensure the company
Table 1
manages financial risk successfully. It is the process of
administering the financial assets and holdings of a Centralized Treasury Management (CTM) vs. Decentralized
business. The main goal is to optimize the company’s Treasury Management (DTM)
liquidity, take right financial decisions for future, and
handle financial risks wisely. It is simply referred to as S Centralized Treasury Decentralized Treasury
cash management. A treasury management system No Management Management
(TMS) is a software application or enterprise resource
1 Under CTM, the Existence of diversified
planning (ERP) software component that automates the treasury management is sources of finance
repetitive steps required to manage a company’s cash set in the head office
flow. A TMS can be managed in-house or purchased as
a service from a third-party provider. It consists of 2 Avoids mix of cash More confusion with
surpluses and overdrafts surpluses and overdrafts
hardware, software and real-time data for cash
at various locations
positions, interest rates, payables, receivables and with
provision for foreign exchange rate 3 Negotiate with banks No scope for negotiation
for lower rate of interest with banks
Less money circulation, increasing interest rates and
economic volatility have paved way for specialized 4 Surplus cash is invested Very less chance of
skills called ‘treasury management’. Though nothing in short-term and investment in short-term
marketable securities securities
has been done till today, the competitive business
environment has created a pressure to manage cash. It 5 Borrow foreign funds at Maximum utilization of
deals with both working capital management (cash cheaper rates of interest borrowed local funds
management) and financial risk management (forex and
6 Efficient management Greater autonomy is
interest rate management, along with equity and of foreign currency given to subsidiaries and
commodity prices). The key objective of treasury risks divisions
management is to plan, organize and control cash assets
to meet future financial objectives of the company. 7 Efficient utilization of More responsive to the
business funds needs of individual
Treasury managers try to minimize losses by adopting
operating units
risk transfer and hedging techniques that suit the
internal policies of the organization.In short, treasury 8 Maintenance of a There is a shift of
management is based on payment and collection favourable balance of favourable and
management, liquidity management and banking funds unfavourable balance of
funds
management which has now taken on a broader
perspective that includes the planning of disposable
treasury assets and their subsequent monitoring, a The treasury operations of any company can be divided
strategy for investing surpluses to obtain maximum into:
profitability and finance deficits with minimum costs,

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A Study On The Role And Importance Of Treasury Management System
(a) Short-term investment of surplus funds to maximize
their benefits.
(b) Short-term borrowings from banks or market for
working capital requirements and temporary shortage of
funds at the lowest possible rate of interest.
Benefits of Treasury Management System
Time Efficiency
Using a treasury management system will streamline
your payment process, minimizing the time spent on
authorization and the initiation of payments.A
Streamlined and distributed authorization process
further minimize the time spent and eradicates
organizational bottlenecks.
Economical
The clarity and complete information offered by a
treasury management system, allowsindetecting the cost
of expensive cross bank transactions.
Reduce Errors
By mapping corporate processes and digitizing
workflow processes helps to reduce arbitrary and
haphazard work and directly minimize the potential for
human errors. The existence of multiple authorization
points helps to automate the routing rules.
Accurate Audit Control
The digitization, enforcement and logging of
authorization process generate a complete, detailed
andaccurate audit trail within a single system. There's
always a complete register of all actions pertaining to a
specific payment.
Detailed andExecutable Insights
The system serves as an Aggregated and Consolidated
Analysis & Reporting platform. Thus it provides
executable insights to discover inefficiencies and
optimization opportunities.
Bank provider flexibility
It acts as a single interface to multiple banks and
accounts. This in conjunction with the emergence of
International Journal of Research in Engineering, IT and Social Sciences
Dr. S.Tamilarasi & Mrs. V. Renuka
global Financial Messaging Standards has the option to
switch bank providers, without affecting the daily
productivity or the workflow.
Compliance and System Standardization
By adopting a Treasury Management System one
canstandardize processes and systems. The team can be
trained in a single system meaning quicker on-boarding
times.
Issues of Treasury Management
Treasury management in India has become an
increasingly specialized function due to regulatory
relaxation and increasing scale of treasury operations.
In today’s context, treasuries are expected to perform
two critical functions:
 Financial risk management
 Financial supply chain management
Financial risk managementincludes currency risk
management, commodity price risk management and
interest rate risk management.
The financial supply chainmanagementis focused on
reducing the borrowing costs, redeploying business cash
flows efficiently and optimizing the risk-return profile
of investible surplus.
Statement of the problem
Capital adequacy, liquidity management, receivable
management and payable management have significant
and positive effect on financial performance on
commercial banks in Mogadishu, Somalia. The goals of
the cash management function bring out the basic
responsibilities of the cash manager, which, broadly
speaking, take up planning, monitoring and controlling
of the cash flows and the cash position of a company,
while maintaining its liquidity (Coyle, 2010, p. 6).
Depending on how many responsibilities it consists of,
cash management can be divided into: treasury
management (or basic cash management) and advanced
cash management. A study of cash management
practices in a sample of Spanish firms done by San José
et al. (2008, p. 192) confirm that treasury management
in a narrow sense or basic cash management, which
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A Study On The Role And Importance Of Treasury Management System
encompasses the fundamental functions of cash
management, has evolved into treasury management in
a broad sense, or advanced cash management.
According to San José et al. (2008, p. 193) basic cash
management involves developing and undertaking
administrative measures aimed at establishing the
optimal level of cash, that would allow the company to
make IJRDO-Journal of Business Management ISSN:
2455-6661 V
Objectives of the Study
 The primary objective of this study is to
conduct an in-depth analysis of the need and
importance of treasury management in non-
banking financial companies.
 To study the role of treasury management
system in planning, organizing and controlling
cash assets of the company.
 To understand the procedure followed in an
effective treasury management system.
 To be familiar with the means to satisfy the
future financial objectives of the company
through active cash management and financial
management techniques.
RESEARCH METHODOLOGY
Treasury management plays an important role in the
cash management of a company. It adds value to the
financial decisions of the company and contributes
significantly in forecasting the cash requirements and
monitors the liquidity position of the company. The
number of companies is increasing day by day and has
high exposure to the investment world. The present
study is based on both primary data and secondary data.
Personal interviews with 75 executives of various non-
banking financial companies were conducted to know
about the economic profile as well as the role of
treasury management system in the growth and
development of the company. The secondary data
included books, journals, magazines and websites. This
is purely a descriptive study and therefore no
complicated models and tools were used.
Target Population
The target population in the research is made up of all
potential participants that form the group to be studied.
International Journal of Research in Engineering, IT and Social Sciences
Dr. S.Tamilarasi & Mrs. V. Renuka
In this study the target population is 75executives of
various non-banking financial companies. A total of 75
out of 80 executives included in the sample responded
to the questionnaire. This represents a response rate of
93.75%. 5 out of the 80 executives were not included in
the analysis as 3 were incomplete and 2 failed to return
back the questionnaire.
Limitations of the Study
This study assumed a favorable environment for the
companies following treasury management system and
managing working capital requirements effectively. The
researcher felt that it might be difficult to get sufficient
and reliable documents and details about the company
and their financial records. However, the treasury
management system can be maintained with the
assistance of professional experts who can render expert
and reliable information. The time limit was also a
constraint for better and detailed study. Future studies
may use this indicator as a mediating / moderating
variable to see whether the results will be different.
Data Analysis
Data analysis is done on the collected data to give
somemeaning from the gathered raw data. The data is
analyzed using simple statistical tools and
questionnaires were distributed to the respondents. The
duly filled in form was later received and consequently
edited, coded and then entered on to the computer. As
data is entered it ischecked for inconsistencies and
errors to produce the right decision.
(i) Role of Treasury Management Systemand its
Importance
The researcher formulated a hypothesis that the
relationship between treasury management system and
its importance in achieving the financial goals is
essential for the financial stability of the company and
the overall economic growth of the country. It is vital to
manage cash wisely and take effective decisions for the
financial future of the company.
Ho: There is a significant relationship between treasury
management system and its importance in achieving the
financial goals of the company.
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A Study On The Role And Importance Of Treasury Management System Dr. S.Tamilarasi & Mrs. V. Renuka

H1: There is no significant relationship between (iv) Respondent’s feedback on treasury management
treasury management system and its importance in system
achieving the financial goals of the company. Response No. of Respondents
From the computations it was found that the null User-friendly 57
hypothesis is accepted and concluded that there is a Costly 24
positive relationship between treasury management Helpful in decisions 41
system and its importance to achieve financial goals of Meet financial goals 46
the company. Accurate and reliable 38
Majority of the respondents (57) have said that the
Table 2 treasury management system is user-friendly, followed
The respondent’s age group and experience in by 46 respondents who conveyed that they are able to
treasury management system meet the financial goals of the company. 41 respondents
find it helpful in managing cash assets and take
Years No. of Percentage effective financial decisions. Other feedbacks were
Respondents
costly, accurate and reliable.
Less than 25 10 13
25 – 35 31 41
35 – 45 25 34 (v)The respondent’s hardship in managing the
More than 45 9 12 treasury management system
Total 75 100 Response No. of Percentage
Respondents
The above table shows that around 41% (31 Yes 22 29
respondents) are between 25-35 years and they have No 53 71
been into treasury management system for quite a few Total 75 100
years. The middle aged persons in the age group of 35-
45 years represent 34% (25 respondents). Followed by About 71% of the respondents have told that they do not
10 respondents in the age group of less than 25 years encounter hardship in managing the treasury system and
and 9 respondents in the age group of above 45 years. 29% (22 respondents) of the respondents are not
efficient with the system and find it difficult to cope
(iii) The respondent’s company size with the technological advancements. Today many
companies are capable to manage machines and man
Response No. of Percentage power efficiently.
Respondents
Big 33 44 (vi) Respondentsview to have professionals to operate
Medium 26 35 the system
Small 16 21 Response No. of Percentage
Total 75 100 Respondents
Yes 28 37
It is clear from the above table that most of the No 47 63
respondents (44%) are working in big company and Total 75 100
their company has an effective treasury management
system to manage their cash management. 35% It is revealed from the above table that 63% respondents
respondents work in medium-size company and 21% consider that there is no need of professional to operate
respondents are in small size company. Nowadays, even the system and that they can handle them with their
the small companies are ready to invest in treasury company accountants. 37% respondents find it difficult
management system for the growth of the company. to manage on their own and prefer to seek the assistance
of professionals.

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A Study On The Role And Importance Of Treasury Management System Dr. S.Tamilarasi & Mrs. V. Renuka

(vii) Respondent company’s cash flow pattern

(revenue)  Using a treasury management system will
No. of streamline company’s payment process,
Response Percentage
Respondents minimizing the time spent on authorization and
Weekly 32 43 initiation of payments.
Random 27 36  The clarity in complete information and
Fixed billing date 16 21 insights offered by treasury management
Total 75 100 system, allows the company to detect the cost
of expensive cross bank transactions.
Nearly 43% of the respondents conveyed that their  The company can minimize float across the
revenue is mostly on a weekly basis. 36% respondents business value chain and thereby reduce the
do not have any fixed time period and that their receipts cost of borrowings from external sources.
are on a random basis. 16 respondents (21%) work for  The Treasury department has to prepare
companies in which they have a fixed billing date. various plans to ensure that cash outflows are
(viii) Disbursement ofpayments compatible with cash inflows, and just in case
borrowings are needed, to ensure that
Response No. of Percentage borrowing plans are in place.
Respondents  As a result of implementing treasury
Batch-wise 17 23 management system, the companies are able to
As bills are received 12 16 obtain financial resources in an economical
On availability of 21 28 manner for the purpose of actualizing the set
funds goals.
Late payments 10 13  There is effective control over cash inflows and
Total 75 100 cash outflows like disbursements of various
expenses.
The above table reveals that 28% of the respondents  The study shows that there is a positive
agree that they make payments only if there are funds relationship between treasury management
available. 23% respondents said that they make system and its importance to achieve financial
payments on a batch-wise basis so as to keep track of goals of the company.
payments. 16% respondents ensure they have adequate  63% of the respondents are confident to handle
funds to make payments and settle their bills as and the treasury system on their own and feel that
when they receive the same. 13% respondents do not there is no need of professionals to assist them
manage their funds properly and always make late to maintain the system.
payments.  The respondents in the age group of 25-35
years are better equipped with the treasury
FINDINGS AND SUGGESTIONS management system as a result of their years of
experience in the field.
The study focused on the importance of treasury  Nearly 44% of the respondents are working
management system in managing cash assets and with big companies which are capable to invest
making wise financial decisions. The practical issues are in the system and ensure timely cash
studied to enhance the use of treasury system. management and wise financial decisions for
Technological progress has paved way for better the growth of the company.
working capital management and financial decisions for  While introducing a treasury management
the future of company. system is difficult, regular monitoring and
The study shows the existence of several internal and maintaining is even more difficult as it
external constraints in maintaining the treasury involves a lot of time and energy to keep pace
management system.

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A Study On The Role And Importance Of Treasury Management System Dr. S.Tamilarasi & Mrs. V. Renuka

with the changing internal and external REFERENCES

conditions.
CONCLUSION
To accomplish the primary objective of effective cash
management, the companies put in place an effective
and an efficient treasury management system and
relevant policiesare framed accordingly. This would
result in optimal generation of revenue and efficient
utilization of the revenue raised. A modern treasury
management system offers the ability to enforce
multiple authorization points and automate the routing
rules, thereby eliminating errors, in payments
processing.An optimal treasury function can reduce
financial risks and financial costs of a company. The
scope of treasury management function is likely to
extend to other areas of the business such as
procurement and commodity risks. Automation may
increase substantially and result in additional benefits to
the company.
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The operating model of the treasury management

system will evolve to more matured state influencing
other decisions of future corporates in the relevant field.
There is going to be a huge increase in investment on
technologies for the betterment of the company.

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