4 top questions about Treasury

1. What is the difference between Treasury and Accounting?

It is Treasury’s job to optimise cash flows based on business objectives, whereas it is the job of Accounting to prepare financial statements that present the clearest possible picture of the financial health of the company.

To understand the difference between Treasury and Accounting, you must understand the difference between cash flows, on the one hand, and income and expenses, on the other. In Accounting, revenue is booked when a sale is made. However, it might take some time before this revenue actually reaches the company in the form of cash. Until it does, booked revenue is generally irrelevant for Treasury. The same is true for expenses. An expense may be booked, but from a Treasury perspective, until an expenditure is disbursed, it is still considered cash on hand.

2. What is the difference between Treasury and Corporate Finance?

In general, Corporate Finance refers to the borrowing and investment strategies used by corporations in order to finance operations and meet strategic objectives. Corporate Finance is a broad field, which is related not only to Treasury, but also to financial accounting and banking. From a financial accounting perspective, Corporate Finance is concerned not only with cash flows but also with the overall financial health of the company. From a Treasury perspective, Corporate Finance is the long-term strategy that determines the scope and objectives for Cash and Risk Management.

Note: Within banking, the term “corporate finance” is often used differently. When bankers speak of Corporate Finance, they are usually referring to a particular line of business for the bank, which involves raising money for corporations or acting as advisers on their behalf. From a banking perspective, Corporate Finance usually means brokering deals between corporations and potential investors.

3. Who is in charge of Treasury within a company?

In small organisations, Treasury work is mostly done by the Chief Financial Officer or finance department. Larger organisations often have their own treasury departments, which are headed by a treasurer who reports to the CFO. Ultimately, Treasury is controlled by the CFO.

4. How has the role of the Treasurer changed over time?

Although the basic role of the treasurer remains the same over time, the content of Treasury activity evolves over time. Due to external factors, such as technology, regulations, and new financial products, some tasks are less time-consuming nowadays then they were in the past.

Traditionally, the job of the treasurer was filled primarily with tasks like bank selection, reconciling bank statements, and managing daily transactions.

These days, many of these tasks can be automated. A treasury management system (TMS) can handle much of this work for the treasurer. Instead, the modern treasurer works increasingly closely with colleagues in the finance and risk departments. The risk of cyber fraud, for example, is now an ever-present concern. In the past, a treasurer only went to the company’s bank for financing. These days, there are many other options for financing, or for reducing financial risk.

Increasingly complex banking and governmental regulations also take up more and more of the treasurer’s time.

It is the task of the treasurer to keep up to date with developments, and to be the consultant for the organisation on all treasury-related subjects.

Read more about Treasury and check out these treasury topics as well:

What is Cash Management?

What is Corporate Finance?

What is Risk Management?

What is Working Capital Management?