Fely Function of Treasury

8/3/2019 Fely Function of Treasury

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What does the treasury functiondo?Main activitivies of the treasury

department1. The primary role is dealing with themanagement of a company's funds

2. Raising Equity capital and workingcapital3. Investing surplus funds


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The treasury dept. is responsible for the timelyavailability of those funds when needed for the supportof the business.

The treasury is a key head office function that enablesbusiness managers to focus on their key areas of expertise, be it manufacturing or sales.

Whether any company has a separate treasury functionor, whether it is incorporated into a finance department,

for example, does not change the nature of theunderlying activity.

The key is that it is a function that supports the main

business activity.


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The aim ought to be to improve the net worth of acompany by managing funds in the most appropriate

manner.- Increasing net worth- This will require a detailed knowledge of a variety of areas of the company

- Key will be an understanding of the overall businessstrategy- This will be the foundation that sets the frameworkthat will drive the treasury function

- Areas of control and oversight- The management of balance sheet exposures(funding, liquidity and cash management).


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H ow?By understanding and being responsible for:1. The provision of capital and working capital2. Functions and characteristics of financialmarkets, including offshore financial centres

3. Controls over dealing operations(segregation of duties, mandates, audit andaccounting etc.)4. Risk management principles for market,operational and credit risks5. Understanding financial products, practiceand procedures (such as money, FX, money

market instruments, bonds and derivatives)


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F unction of Treasury Management

1. To maintain the liquidity of business

It is the main function of treasury management

to maintain the liquidity of business. Withoutproper liquidity, it is risk for business to operatesmoothly. By using cash flow analysis andworking capital management . Treasury officer make good ratio of liquid assets and liquidliability.


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2 . To Minimize Currency Risk

For this, treasury managers touch with currencymarket of world. They analyze the reason of

crisis in currency market. Sometime this crisiswill be benefited for them because they have topay less to other country for getting their service at cheap rates.


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3 . To provide quick finance to

Company

It is also function of treasurydepartment to supply quickfinance to company, when it needs

the money. For this, a goodnetwork in financial market isrequired.


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TREASURY MANAGEMENT AND ITSF UNCTIONS

If we have to describe treasury management,then we can state that it is the management of cash , fund , currency, bank and financial risk.

So, it is an imperative tool of finance. In thismanagement, finance manager checks thecash inflow and outflow. H e makes the list of allreceivable amounts which will increasetreasure house of company . H e also tracks thedates in


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which he has to receive the fund fromdebtors . Under this management, heestimates all financial risk for investmentof cash. All investment is on the basis of investment policy. Many organizationshave separate treasury department. If company deals with foreign currency, thenmanagement of foreign currency risk isthe duty of treasury department. Suppose,Google Inc.


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USA Company which is a MNC

and it receives the fund fromadvertisers and shares withadsense publisher. A goodtreasury officer can give theadvice to Google Inc. about when

company should pay the bill of adsense publishers.


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Suppose, there are 90, 00,000 adsensepublishers and approximate $ 100 whichcompany has to pay to each Indian adsensepublisher after one month. Now within 15days, Google Inc. will choose that day when

the price of dollar in Rupees will beminimum. Suppose, if company paid on 21stFeb. 2010 $100 to one publisher when the

price of dollar is Rs. 46.5 and pays Rs. 2139and if the next day, price will decrease 0 .5dollar. Then, it means Google Inc. is inforeign


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currency loss Rs. 50 each publisher because,company has power to pay in next day andsave Rs. 50 for each adsense publisher. If company has to pay $100, then company canreceive loss of Rs. 45 Crore due to foreign

currency loss. So, to manage foreign currencyand control is major project under treasurymanagement. In government departments, fundmanagement is under treasury management.Treasury department makes map to collect for govt. treasure and decide how to use it for welfare works. Finance manager creates good

relationship for getting locker


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facility at cheap rates and company cankeep its important documents in locker of banks. These documents and commercialpapers can be sold by banks in moneymarket and company can take part inmoney market by indirect way. Financemanager also do the duty to sell companysfixed assets at high price and he also

acquire the properties for company at cheaprate for effective utilization of treasure of company.


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Treasury Management Versus CashManagementMajor changes of corporate treasurymanagement policies have been in the pastfew decades. Treasury management has

gradually taken up more and moreresponsibilities. In the 1960s treasury-relatedtasks entailed purely routine work in what

was no more than an ancillary function as acentralising cash management unit linked toadministrative tasks. In the 1970s the


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first significant changes began to take placeas the economic environment was hit byrecession, which favoured the emergence of new short-term monetary policy instrumentsand the first hints of deregulation of financialmarkets, but treasury management was stillrestricted to the obtaining of funding, themanagement of payments and collections

and the maintenance of bank balancepositions. It was not until the 1980s that itbecame integrated into general corporate


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management and finally outgrew its purelyadministrative function linked to theaccounting department. Treasury functionsbegan to be based essentially on a financialcash management or liquidity management

perspective. More recent advances(development of new information andcommunication technologies, emergence

and use of new financial instruments and anapproach to business focused on increasingthe value of organizations in all


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areas) have favoured the development of new treasury management functions , andincreased the importance of treasurydepartments within companies. In this way,now the techniques and instruments required

for optimum development are available(Fernndez, 2001).The functions now linked to treasury

management extend beyond the merecontrol of monetary flows and positions.Exchange-rate and interest-rate volatility inthe wake of the


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internationalization and deregulation of currency markets, the need to increasecontrol of credit risk in increasinglycompetitive markets and the appearance of new financial instruments have forced

treasury management to become moreforecast-based in its actions, with moreemphasis on the management of

investments, treasury deficits and differentfinancial risks. Basic responsibilities of treasury departments will be those tasksthat enable companies to use the


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techniques and information needed tominimise the financial costs of resources and maximise returns oncash surpluses, thus providing themwith the necessary treasury funding inthe desired currency at the appropriatetime, as argued by Lpez (2003), and

others.In the terminology of cash managementliterature this term brings together

various


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functions associated with short-termfinancial flow management: liquiditymanagement, banking management,management of treasury surpluses

and deficits and financial riskmanagement; it is a broader conceptthan the mere management of

payments and collections (treasurymanagement).

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Fely Function of Treasury