MODULE 1 outflows in the organization as there
are a number of cash transactions
Treasury involves the management of
money and financial risks in a business.
Management is an art of getting things
done through and with the people in
formally organized groups
Treasury Management is “The
management of the organization’s
investments and cash flows, its banking,
money market and capital market
transactions.
Functions of Treasury Department
1. Cash Forecasting
● Cash forecasting by using the
information brought by the
accounting and finance department.
2. Liquidity Management
● This is the management of ensuring
that the organization has sufficient
cash on hand for them to be able to
meet its financial obligations.
➢ Working Capital
The available cash on hand or
current assets for the organization to
meet its current liabilities to which
are due within one year or within a
normal accounting period/cycle.
3. Availability of funds in adequate quantity
and at the right time
● This is also ensuring that the
organization has sufficient funds, but
this is to support the daily operations
of the organization to which can
greatly contribute in generating
income.
➢ Cash Management
This usually refers to administering
or monitoring of cash inflows and
that
are usually occurring in day-to-day
operations to which they must
manage in order for the organization
to maximize liquidity and minimize
the costs.
4. Deployment of funds in adequate quantity
and at the right time
● The proper allocation of funds must
be accurate and enough for both the
investing and financing activities of
the organization to which the
possible activities are acquiring fixed
assets, purchasing materials, and
the payments for expenses.
➢ Investment Management
This simply refers to the proper
management of the financial assets
and other investments of the
organization to which it does not
focus on either buying and selling of
it.
5. Optimum utilization of resources
● This is when the treasury ensures
that the activities that are being
conducted by the organization are
effective in terms of using their
resources.
6. Treasury Risk Management
● In managing risk, this can somehow
forecast the possible situations for
the organization that can serve as
an advantage to them or
disadvantage.
➢ Bank Relationships
The treasury department are the ones who
represent the organization upon
meeting any bank.
➢ Fund Raising
This is a function to maintain the excellent
relationship between the
organization and its investors.

The Four Pillars of Treasury Management
1. Funding
Implementing tactics that result in
the best borrowing rates and lowest
investment costs is the goal of
funding management.
● Loans Management
- Reduce borrowing costs
- Get competitive Rates
● Investment Management
- Value from regional and
consolidated cash
- Redeploying surplus business cash
flows
- Reduce demand for cash
- Investment policies and procedures
● Managing Risk Return Profile
● Tax efficiency of investments
● Trading activities and deals
2. Bank Relationships
Bank Relationship is an active notion
in customer service. The bank
allocates a national relationship
manager to an account under this
business model to handle all of the
client's demands.
3. Risk Management
The treasury function is responsible
for providing guidance on and
carrying out appropriate hedging of
treasury type risks, including foreign
exchange, interest rate, and
commodity price risks, as well as
liquidity, credit, and counterparty
risks.
Corporate Treasury is responsible for
helping manage corporate-wide risk,
including:
a. Foreign exchange risk.
Management of foreign exchange risk can
help a company's cash flows and
earnings are less erratic.
b. Interest-expense risk.
Interest risk management is helpful for
lowering a company's cash flow and
earnings volatility as well as for preventing
major rises in interest payments that
can negatively affect a heavily leveraged
company's financial well-being.
4. Liquidity and Working Capital
The treasury function is responsible
for making sure the business has
enough liquid funds on hand to
maintain a smooth operation and to
pay short-term financial obligations
when they become due.
MODULE 2
TREASURY DEPARTMENT
● The liquidity of a firm is managed by
the treasury division. The treasurer
must keep an eye on the
organization's expected and actual
cash flows as well as its specific
funding requirements.
A. Role and Organization of Treasury
Department
● The treasury division makes sure
that a business has enough for the
sake of its main business
operations, cash is always available.
Its obligations go far beyond
 achieving that particular objective,
though.
The following sectors also fall within its
purview in a big way:
Cash Forecasting - Cash reception and
distribution are typically handled by the
accounting team, but the treasury team
must gather this data from all subsidiaries to
create short- and long-term cash predictions
Working Capital Management - The working
capital levels and trends should be known to
the treasurer, and provide management with
information on how proposed policy
changes may affect the amount of operating
capital.
Cash Management - The efficiency of this
area is significantly improved by the use of
cash pooling systems.
Investment Management - The treasury
staff is responsible for the proper
investment of excess funds.
Treasury Risk Management - The interest
rates that a company pays on its debt
obligations may vary directly with market
rates, which present a problem if market
rates are rising.
Management Advice - The Treasury
Department keeps an eye on the market
frequently.
Credit Rating Agency Relations - It is
possible that a credit rating agency will
examine the company's financial situation
when a company issues marketable debt
and give the debt a credit rating.
Bank Relationships - The treasurer meets
with the representatives of any bank that the
company uses to discuss the company’s
financial condition.
FundRaising - It is a key function for the
treasurer to maintain excellent relations with
the investment community for fund - raising
purposes.
Credit Granting - This task is useful for the
treasury staff to manage, since it allows the
treasurer some control over the amount of
working capital locked up in accounts
receivable.
Other Activities - The treasury team should
be skilled in integrating the treasury
systems of acquirers into those of the
company if a company often engages in
mergers and acquisitions.
B. TreasuryControls
● The management of an
organization's cash flows, liquidity,
and risks is a function of treasury
services. They are necessary to
guarantee financial stability,
effectiveness, and compliance.
Segregation of duties - This lessens the
possibility of collaboration, manipulation, or
financial abuse by a single person or entity.
Reconciliation and verification - Verification
and reconciliation of transactions and
balances are important treasury controls.
Audit and compliance - The function of
compliance and auditing is a third crucial
treasury control.
Training and awareness - The education
and knowledge of the treasury employees
and stakeholders constitutes a fourth crucial
treasury control.
Technology and security - The technology
and security of the treasury systems and
data make up a fifth essential treasury
control.
Continuous improvement - Continuously
improving treasury operations is the sixth
and final Treasury control.
C. Treasury Job Description
● The treasurer usually reports to the
Chief Financial Officer (CFO). The
treasurer’s job description
essentially establishes responsibility
for the tasks noted in the preceding
topics.
D. Position of Treasury within the
Corporate Structure
● Corporate treasury manages a
company’s financial assets and
liabilities. The treasury department,
often helmed by a Treasury Manager
or Treasurer, serves as the central
hub for financial decision-making,
and handles various responsibilities
such as cash management, risk
mitigation, capital markets, and
compliance, acting as the core for
financial decisions.
Key Corporate Treasury Department
Functions and Responsibilities:
1. Mastering Cash and Liquidity
Management: By optimizing cash flows and
liquidity management.
2. Pioneering Financial Risk Management:
By proactively identifying and mitigating
risks.
3. Securing Capital Markets and Funding:
By securing cost-effective funding options.
4. Perfecting Corporate Financial
Management: By developing appropriate
cost structures and assessing investments.
5. Navigating the Regulatory Landscape: By
maintaining a compliance framework the
treasury department meets reporting
obligations and stays ahead of regulatory
changes.
E. TreasuryCentralization
● Centralized treasury is a financial
management structure in which a
company's treasury functions are
centralized into a single department
or team.
Stages in Treasury Centralization
Stage 1: Complete Decentralization -
individual locations manage their own bank
accounts, foreign exchange transactions,
customer credit, payables, borrowings, and
investments.
Stage 2: Centralized netting and hedging - a
central staff nets payments between
subsidiaries and hedges major foreign
exchange and interest rate risks. Local
locations still manage their own bank
accounts, customer credit, payables,
borrowings, and investments.
Stage 3: Centralized investments - in
addition to prior centralization, a central
treasury staff consolidates and manages all
bank accounts, including pooling of funds
and investment of those funds. Local
locations still manage customer credit and
payables.
Stage 4: Centralized working capital
management - In addition to prior
centralization, the central treasury staff
centralizes credit granting and uses a
payment factory for centralized payables
management.
F. Treasury Compensation
● The treasury staff should not operate
under a bonus plan that issues
compensation based on unusually
high rates of return on investment,
nor for gains from active speculation
in other currencies.
Bank Relations
● Bank relations are a key part of
treasury management because they
directly impact an organization's
ability to efficiently manage its
financial resources, liquidity, and
cash flows.
● Bank relations refers to the
interaction, collaboration, and overall
relationship between an
organization, such as a business,
government entity, or nonprofit, and
the financial institutions it works with,
primarily banks (First Citizen Bank,
2022).
This relationship encompassess some
financial and banking aspects like:
➔ Financial Services Partnership
Bank relations are the partnership of
an organization and its banking
partners to gain access to a variety
of financial services, such as
investment opportunities, banking
services, and insurance and risk
management.
➔ Payment and Collection Transactions
These are crucial elements of bank
relations, especially for companies
and organizations.
➔ Bank Account Management
Banks can help businesses manage
multiple bank accounts by offering a
variety of services, tools, and
solutions to ease account
management and maximize cash
flow. An example of this are the
online banking platforms.
➔ Credit and Financing
For the purpose of providing working
capital, financing expansion, or
funding strategic projects,
businesses frequently require credit
facilities. A strong relationship with a
primary bank can result in more
favorable lending terms, competitive
interest rates, and quicker credit
access when required.
◆Loan Covenants
Loan covenants are a set of rules or
conditions imposed by lenders in
loan agreements to protect their
interests and assure borrowers'
financial health and ability to repay
the loan. Treasury management is
critical in monitoring and adhering to
these covenants in order to avoid
default.
◆ Collateral
A treasurer must use extreme
caution in cases when a corporation
has borrowed funds and is expected
to provide collaterals as security for
such loans. Although collateral can
also be used to manage other types
 of financial transactions, such as
derivative contracts, it is better to
ensure loan agreement compliance
to protect the company's financial
health.
➔ Financial Advisory
Many major banks provide financial
consulting services with expertise in areas
like asset management, investments, and
risk assessment. The expertise and
guidance that banks can offer to businesses
can help them make better financial
decisions and maximize their monetary
returns.
H. Treasury Outsourcing
● According to FTI Treasury (2023),
treasury outsourcing is the practice
of employing a third-party contractor
to manage a company's treasury
functions. This involves tasks like
cash management, risk
management, and financial
reporting.
Companies may outsource their treasury
services for a variety of reasons since
outsourcing can provide numerous benefits
and advantages. The following are some of
the primary reasons:
➔ Cost Savings
Outsourcing can be considerably
less expensive than retaining an
in-house treasury department.
Companies can save money on
salaries, benefits, office space,
technology, and regular training for
treasury personnel.
➔ Improved Efficiency
Outsourcing treasury procedures
can help reduce the complexity of it,
decrease manual effort, and
increase overall efficiency in cash
management, payment processing,
and other treasury functions.
➔ Access to Experience
Companies can benefit from the
skills of experienced treasury
professionals with extensive
knowledge in cash management,
risk management, investment, and
financial markets via outsourcing.
This can lead to improved financial
decisions and risk management.
➔ Enhanced Compliance
Outsourced treasury providers can
help businesses achieve regulatory
compliance and reporting standards,
guaranteeing that financial
operations are carried out in
conformity with applicable laws and
regulations.
Treasury Metrics
● Treasury metrics, often known as
treasury key performance indicators,
are measures used to track and
analyze treasury performance.
Here are three key categories of treasury
measurements for businesses:
➔ Operational Metrics
This allows companies to keep track
of the efficiency of the following
business operations. This can be
tracked in the company’s investment
portfolio returns, ending balance,
and cash concentration.
➔ Analytical Metrics
 This allows companies to keep track
of the efficiency of the following
business operations in terms of
foreign exchange exposure, hedging
effectiveness, financial health
(financial ratios), and payment and
collection efficiency.
➔ Strategic Metrics
This allows companies to keep track
of the efficiency of the following
business operations in terms of
long-term funding and strategic
initiatives.
MODULE 4
Cash forecasting is absolutely crucial to the
operation of every organization. If
there is ever a cash shortfall, payroll cannot
be met, suppliers are not paid, scheduled
loan payments will not be made, and
investors will not receive dividend checks.
This chapter covers how to construct a cash
forecast and automate the creation of some
of the information contained within it, and
how to create a feedback loop for gradually
increasing the accuracy of the forecast.
A. The core of any cash management
system is the cash forecast - It is
imperative for the management team
to be fully apprised of any cash
problems with as much lead time as
possible.
B. İnformation sources for the cash
forecast - The cash forecast shown
in the preceding exhibit primarily
includes scheduled items, which are
specific cash inflows and outflows
that can be predicted with a
reasonable degree of accuracy.
Examples of scheduled items are
specific accounts
receivable and scheduled payroll
payments. If the treasurer wants an
accurate cash forecast, then as
much of it as possible should be
scheduled items.
C. Measuring cash forecast accuracy -
A cash forecast is useless unless it
can be relied upon to yield accurate
cash flow information for some
distance into the future. There are a
few ways to improve the forecast, all
involving the continuing comparison
of past forecasts to actual results
and correcting the system to ensure
that better information is provided for
future forecasts.
D. Cash forecasting automation -
represents an innovative approach
to handling a company's financial
operations. The term "cash
forecasting automation" can
encompass two aspects: full
automation of the entire process or
automation of its individual
components.
Why Do Companies Automate Their Cash
Flow Forecasting?
1. Minimize Errors and Improve Precision
To create precise cash flow
forecasts, it's essential to aggregate
data from diverse sources like
accounting systems, banks, and
ERP systems. Traditionally, this is a
manual process using spreadsheets.
2. Standardize Processes
In many client projects, the goal is to
establish consistent procedures
throughout the organization.
 Companies with multiple units often
employ varied
forecasting methods, particularly
when dealing with local banks and
financial systems.
3. Reduce Manual Work
Automation in forecasting reduces
the manual workload for finance and
treasury teams. Tasks like accessing
bank accounts, ERP systems, and
accounting data and combining them
for forecasting are time-consuming
and tedious.
4. Gain Instant Access
Cash flow forecasting is often
scheduled at regular intervals, but
unexpected requests for forecasts
can arise. Manual forecasting is
usually not agile enough to respond
quickly to such unforeseen demands
5. Support Better Decision-Making
Automation can enhance forecasting
precision, particularly when
employing tools like predictive
analytics. These tools use historical
data, trends, and statistical models
to improve forecasting accuracy over
time.
E. Bullwhip effect - is a notable
occurrence within supply chains. It
manifests when minor fluctuations in
retail demand lead to increasingly
significant fluctuations in demand at
the wholesale, distributor,
manufacturer, and raw material
supplier levels.
F. Business cycle forecasting - is a
critical practice in the field of
economics and finance. It involves
the use of various analytical tools,
statistical models, and economic
indicators to anticipate shifts in the
economic landscape, particularly at
the onset of recessions or
expansions.
These actions are presented in increasing
order of complexity:
1. Report on published forecasts
Nearly all major business magazines
provide economic forecasts.
2. Subscribe to a forecasting service
Organizations can invest a
significant fee, often ranging from
five to six figures, to access
specialized forecasting services that
offer more industry-specific reports.
3. Develop an in-house forecasting model
In cases where a company intends
to run its unique forecasting model
or when specialized forecasting
services are unavailable,establishing
an in-house forecasting system is
warranted.
G. Cash forecasting controls
The daily cash forecast usually is
assembled quickly, using the
preceding days forecast as a
template, and with only minor
updates. A less frequent forecast
may be assembled “from scratch,”
without attempting to roll forward the
old forecast; this increases the risk
of errors.
If a forecast is issued on a daily basis, then
the treasurer should focus controls
on the incremental daily changes in the
forecast.
This can be achieved with the following
two controls:
1. Investigate significant variances from the
preceding day’s forecast
This is a side-by-side comparison of
the current day’s forecast and the
immediately preceding day’s
forecast.
2. Obtain the approval of a knowledgeable
person
Another person should briefly review
the forecast, initial it, and retain a
copy.
If a forecast is generated less frequently, the
controls should include the preceding two
controls (with some modifications), as well
as additional controls. They are:
● Match latest forecast against
preceding forecasts. It is useful to
compare the new forecast against
several preceding forecasts.
● Match forecast against standard
forecast checklist. When a forecast
is being prepared on an infrequent
basis, there is an increased risk that
some line items in the forecast will
be inadvertently left out.
● Obtain approvals. The less
frequently a forecast is prepared, the
more approvals it needs, since the
company is going to rely on it for a
longer period of time.
● Retain a copy. The best way to
investigate the accuracy of a cash
forecast is to compare it to the
forecasts from prior periods, so
retain a copy of every forecast.
Finally, if the forecast is created using an
electronic spreadsheet, then the
departmental year - end procedure book
should include a requirement to verify every
formula in the most recent cash forecast.
H. Cash forecasting policies
● The treasurer should implement
policies that will assist in the
management of two aspects of cash
forecasting, which are the issuance
frequency and review frequency of
the forecasts.
Sample policies include the following:
● Cash forecasts shall be issued on a
[daily/weekly/monthly] basis. This
policy ensures that cash forecasts
are issued with sufficient frequency
to match the periodic updating of a
company’s debt and investments.
● Cash forecasts shall be structurally
updated at least once a
[month/quarter/ year]. A cash
forecast may gradually become less
accurate over time, due to changes
in the business that are not reflected
in the cash forecast model.
I. Cash forecasting procedure
● Is least likely to be used if an
experienced person prepares a
forecast every day, but can be quite
useful for more infrequent
forecasting intervals or for training
purposes, where there is less
certainty about the various
components of the forecast.