Corporate Treasury

Corporate treasury is the department of a non-financial company that manages its money: the cash it holds, the funding it raises, the bank accounts it runs and the financial risks it carries. It makes sure the business can pay its suppliers, staff, lenders and tax authorities on time, keeps enough liquidity for bad months, and puts surplus cash somewhere safe. The work is sometimes also called treasury operations when the focus is on the daily processes rather than strategy.

Corporate treasury sits inside the finance function, usually under the chief financial officer, next to the controller who runs accounting. It should not be confused with a government treasury, which manages public money, or with the treasury desk of a bank, which manages the bank's own balance sheet. The broader discipline of treasury management covers all of these; corporate treasury is the version practised by ordinary companies.

Think of the person in a large household who keeps track of every bank account, knows when the rent and school fees fall due, decides how much to keep in the current account and how much to put in savings, and arranges a loan before a big purchase rather than after. That person does not earn the family's income or decide what to buy, but makes sure money is in the right place when it is needed.

Corporate treasury does the same job for a company, only with dozens of bank accounts, several currencies and much larger sums. Sales and purchasing decide what the business does; treasury makes sure the cash side of those decisions works and that a sudden shock, such as a bank failure or a currency move, does not leave the company unable to pay its bills.

Most treasury departments cover the same core areas, though small companies may run them with one or two people and large groups with a team in several countries:

• Cash and liquidity. Treasury runs daily cash positioning, builds the cash forecast, and moves money between accounts through structures such as a cash pool or sweep accounts. This is the practice usually described as cash management.
• Funding. Treasury arranges bank facilities, bond issues and commercial paper, and monitors covenants in loan agreements.
• Investing surplus cash. Spare cash goes into low-risk instruments such as bank deposits, treasury bills or a money market fund, under a written investment policy that puts safety and access ahead of return.
• Financial risk. Treasury measures and manages foreign exchange risk, interest rate risk and the credit exposure to banks and other counterparties, often through hedging with forwards, swaps and options.
• Banks and payments. Treasury chooses the company's banks, opens and closes accounts, controls who can sign payments, and connects the company's systems to its banks.

Treasury does not own the trading cycle, but it is measured by it. Cash is tied up when customers pay late through accounts receivable, released when the company pays suppliers later through accounts payable, and absorbed by inventory. Treasury therefore tracks working capital and the cash conversion cycle with the controller, sales and purchasing teams, and its own figures have to agree with the general ledger.

Hedges also have an accounting side. A company that wants its hedges to offset the hedged item in the same reporting period applies hedge accounting, under IFRS 9 or, in the United States, ASC 815. That requires documentation at the start of each hedge, so treasury and accounting usually agree the approach before any trades are done.

Large groups often centralise treasury. Common models include an in-house bank, where the treasury centre holds accounts for each subsidiary and nets their balances; a payment factory, where one team sends all of the group's supplier payments, sometimes as payments on behalf of subsidiaries; and netting of intercompany invoices so that only the net amount moves between group companies each month.

The main tools are the company's enterprise resource planning (ERP) system, which holds the accounting and invoice data, and a treasury management system for positions, deals and forecasts. These receive bank statements and send payment files through bank connectivity channels such as SWIFT, host-to-host links or bank APIs, increasingly in ISO 20022 formats. Smaller firms often run treasury on spreadsheets and their banks' online portals.

Treasury staff in the United States often hold the Certified Treasury Professional (CTP) credential from the Association for Financial Professionals; in the United Kingdom the Association of Corporate Treasurers awards its own qualifications.

Because treasury can move large sums, it is a prime target for payment fraud, especially business email compromise in which a fake executive or supplier asks for an urgent transfer. Standard controls include separating the people who set up payments from those who approve them, dual approval above set limits, call-back checks on any change to bank details, and regular bank reconciliation.

Treasury also manages counterparty risk on its own banks. The failure of Silicon Valley Bank in March 2023, when many technology companies held most of their cash in one institution, led treasurers to spread deposits across more banks and to review limits per bank. A clear treasury policy, approved by the board, sets those limits, the instruments treasury may use and who may authorise what.

• Association for Financial Professionals (AFP)
• The Association of Corporate Treasurers (ACT)