What is treasury management?

Treasury management encompasses the strategies and processes for managing a company's cash, investments, and financial risk to ensure adequate liquidity and optimize returns on excess funds. For professional service firms, treasury management ensures cash is available when needed while earning returns on idle funds.

Key characteristics

• Cash management strategy

• Liquidity planning

• Investment of excess funds

• Risk management

• Working capital optimization

• Banking relationship management

Why it matters for professional service firms

Poor treasury management leaves cash idle or creates shortfalls. Good treasury management ensures bills are paid, opportunities are funded, and excess cash earns returns. Professional service firms should implement basic treasury practices, including cash forecasting, reserve maintenance, and relationship banking.

Real-world example

Amanda's firm averaged $180,000 in checking, earning 0.1%. Treasury improvement: established $50,000 operating target in checking, swept excess to money market earning 4.2%. The average excess of $130,000 now earns $5,460 annually versus $130. Added a 13-week cash forecast to anticipate needs. Treasury basics added meaningful income with minimal effort.