- Management of funds
- Availability of the funds in right quantity
- Availability in right time
- Deployment in right quantity
- Deployment in right time
- Profiting from availability and deployment
- The function of treasury mgt. Is concerned with both macro and micro facets of the economy
- At the macro level, the pumping in and out of cash, credit and other financial instruments are the functions of the government and business sectors, which borrow from the public
- These two sectors spend more than their means and have to borrow in finance their ever-growing operations. They accordingly issue securities in the form of equity or debt instruments.
- The latter are securities including promissory notes and treasury bills which are redeemable after a stipulated time period.
- Such borrowings for financing the needs of the government and the business sector are met by surplus funds and savings of the household sector and the external sector. these two sectors have a surplus of incomes over expenditure.
- The micro units urtilise these surpluses and build up their capacities for production of output and this leads to the productive system and distribution and consumption systems.
- Unit level: the performance of production, marketing and HRD functions is dependent upon the performance of the treasury department. the lubricant for day-to-day functioning of a unit is money or funds and these funds are arranged by the treasury manager.
- Domestic level: the scope is to channelise the savings of the community into profitable investment avenues. This job is performed by the commercial banks. TM is a crucial activity in banks and financial institutions as they deal with the funds, borrowings and lending and investments.
- International level: is concerned with management of funds in the foreign currencies.
RELATIONSHIP BETWEEN TREASURY MGT. AND FINANCIAL MGT.:
- Control Aspects:
- Financial mgt. Is to establish, coordinate and administer, an adequate plan for control of operations.
- Treasury mgt. Is to execute the plan of finance function
- The finance function of a firm would fix the limit for investment in short term instruments for a firm
- It is the treasury function that would decide which particular instruments are to be invested in within the overall limit having regard to safety, liquidity and profitability.
- Reporting Aspects:
- FM is concerned with the preparation of profit and loss account and the balance sheet. Taxation aspects and external audit. And reports are submitted to the top mgt. Of the firm.
- TM is concerned with monitoring the income and expenditure budgets on a periodic basis vis-à-vis the budgets. it is also involved in the internal audit of the firm.
- Strategic Aspects:
- For FM are the investment and financing. While making these choices, the finance manager is taking a long term view of the state of affairs
- For TM is more short term in nature. The treasury manager has to decide about the tools of accounting and development of systems for generation of controlling reports.
- Nature of Assets:
- The finance manager is concerned with creation of fixed assets for the firm. Fixed assets are those assets which yield benefit to the firm over a longer period of time.
- The treasury manager is concerned with the net current assets of the firm. Net current assets are the difference between the current assets and current liabilities of the firm.
ROLES OF THE TREASURY MANAGER:
- Originating roles
- Supportive roles
- Leadership roles
- Watchdog roles
- Learning roles
- Informative roles
RESPONSIBILITES OF THE TREASURY MANAGER:
- Compliance with statutory guidelines
- Equal treatment to all departments
- Ability to network
- Integrity and impartial dealings
- Willingness to learn and to teach.
TOOLS OF TM:
- Analytic and planning tools
- Zero based budgeting
- Financial statement analysis
INTERNAL TREASURY CONTROL:
- Is a process of self-improvement. It is concerned with all flows of funds, cash and credit and all financial aspects of operations.
- The financial aspects of operations include procuring of inputs, paying creditors, making arrangement for finance against inventory and receivables.
§ Control should be at all levels of management and participation should be from all cadres of personnel.
§ There has to be a system of building up of effective communication from top to bottom and bottom to the top.
§ The control should be built upon the management information system.
ENVIRONMENT FOR TREASURY MANAGEMENT:
- Legal environment: refers to the legislations, which govern corporate functioning.
- Regulatory environment: regarding employment, wages, land laws, promotion of units and closure of units etc.
- Financial environment: pertains to policies regarding monetory and fiscal control, financial supervision, exchange control etc.