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Treasury Surplus: What it is and how to manage it in the most optimal way


The treasury is the area of ​​a company where the movements or actions related to the inputs, outputs and money management are managed. When speaking of surplus treasury or surplus cash, reference is made to the available capital that remains after having met financial obligations and having covered operating expenses using the organization’s income derived from business activity.

It is understood that having or generating a cash surplus is an indicator of favorable financial health for the entity. This is because the income or money inflows are greater than the outputs or operating expenses of the business. Having money available at the end of the year implies that the entity is in a liquidity position with which they will be able to cover their obligations or even create a contingency fund in case unforeseen situations appear during operations.

This article will exhaustively analyze the scenarios in which an excess of cash can occur, how to manage them, the risks that having an excess of cash can entail, the best way to avoid it and examples based on day-to-day situations.


What can cause excess cash?

Treasury surplus can be caused by different reasons and situations that a company may face. The main factors include the following:

  1. High profits: If the company is able to increase revenue from its sales or reduce costs, this could result in surplus cash. Several situations can occur for this to happen, such as having a high sales margin, increased demand, good cost management or effective sales strategies.
  2. Sale of assets: The sale of assets such as machinery, shares, buildings, among others, mainly those that are not of great importance to the company, generate a cash income. This is a contribution to generate excess cash.
  3. Debt control: When the company achieves adequate debt management, for example, by paying or reducing them, it can achieve a cash surplus.
  4. Reduction of dividends: A reduction in the payment of dividends or even the suspension of its payment will generate less outflow of capital, so the surplus may increase. However, since dividends are generally paid out of excess earnings and cash, this case is somewhat of an exception.
  5. Early collections: Early sales income will mean that the company is obtaining cash before the sale costs are fully reflected in the entity’s accounting.

Due to the factors presented, a company can have treasury surpluses or cash surpluses. When talking about available cash, one thinks about the advantages that this can bring. However, for benefits to emerge, there has to be effective management of these surpluses.

Management of treasury surplus

The treasury or cash of a company must be managed in the best possible way to guarantee a healthy financial position. Proper treasury management is becoming a fundamental part of business management. The objective is for the company to be in the optimal liquidity position to be able to cover its obligations, as well as maintain good profitability. Below, we present a series of strategies for the effective management of surplus cash:

  1. Adequate management of clients and suppliers: Anticipating collections from clients, and delaying payments from suppliers, can allow us to have a positive cash situation at all times. Having adequate management of customers and suppliers is essential to have optimal treasury management.
  2. Payment of debts: The company’s obligations or debts payable must be reduced in order to reduce future interest payments and improve the image and position of the company.
  3. Emergency fund: Building an emergency fund will provide a cushion to lean on at some point in adverse situations, as happened years ago with the COVID19 pandemic.
  4. Repurchase of shares: When you have enough cash, you can resort to repurchasing shares in order to increase control and value over the same company and for its shareholders. This case would be an exceptional management only accessible to large companies.
  5. Investments: The treasury surplus can be used to make safe investments that can remunerate the company. In this way, liquidity can be generated. Generally, this type of treasury investment is usually short-term and with little or no risk. On the other hand, strategic investments can be made for the expansion and growth of the business in the longer term.
  6. Distribution of dividends: To satisfy and provide security to shareholders, excess capital can be used to pay additional dividends.
  7. Returns: Cash back to customers can be given with this surplus. Through this strategy, the company will be able to create better relationships.
  8. Reinvestment: The surplus capital can be reinvested in the same company. For example, you can invest in training for staff or in improving equipment, facilities, processes, among others.

The strategies mentioned above are some of the applicable examples that a company or its management team can use in order to make the most of a cash surplus. However, if proper management of surplus cash is not achieved, the organization may face problems and risks.

Risks of cash surpluses

Although cash surpluses can be a sign of a company’s financial health and liquidity, if they are not managed effectively, the company can assume a series of risks:

  1. Opportunity cost: If cash is kept within the company, it could be losing the benefits that investing in assets with potential could bring.
  2. Inflation: Money often loses value over time, so keeping it as savings and not using it to improve the company’s profitability can be detrimental.
  3. Dividend Pressure: Excess cash can raise shareholder concerns about dividend payments. If shareholders expect an immediate distribution of dividends with this cash, the opportunity to invest in factors that can promote the development and expansion of the business will have been lost.
  4. Bad investments: If the company has a surplus of cash, this can lead to different investments being made in the stock markets or investments that involve high risk. This is how the company would be exposed to market changes and losing liquidity for having used the cash to purchase assets.
  5. Tax Exposure: Having cash surpluses can mean being exposed to higher tax rates. Avoiding these tax implications requires effective money management.

As has been shown, excess cash can also mean a series of risks if it is not managed in the best way. To be profitable, excess cash requires strategic management so that good decisions are reflected in increased profitability of the company.

Metrics to measure the performance of treasury surpluses

To measure the performance of excess cash, certain metrics or KPIs can be used that will help to have a better picture of the profitability and management of the company. Here are some examples of metrics that can be used to evaluate what has been said:

  1. Net Present Value (NPV): It is the metric that demonstrates the present value of the cash flows of a company’s investments. It can be used to evaluate individually or globally the different investments that the company has made with the money from the treasury surplus.
  2. Rate of return: It is the percentage measurement of the return on a company’s investments.
  3. Contribution margin: It is considered as the net income from an investment, in this case made with the entity’s available cash.
  4. Recovery period: It is the time that the company takes to recover the surplus of cash once it is invested. A lower payback period is considered positive.
  5. Benchmarks: The comparison of the results obtained with the objectives of the company is essential to assess whether the management of the treasury surplus is giving the desired results.
  6. Dividend Yield: The dividend yield is the relationship between the amount of money paid in the form of a dividend and the value of the stock at that time.
  7. Sensitivity analysis: This analysis allows evaluating the way in which some factors such as projections, interest rates or operating costs have an effect on the return on investments made with the surplus.
  8. Risk analysis: The metrics related to the risk that a company would be assuming when making investments with the available cash is also an indicator of how exposed the company is to fluctuations in the market or sociopolitical and economic environment of the country.

Although the above metrics are indicators of investment performance or risk in general, they are the same ones that should be used to measure the return on cash from surplus cash, as well as a way of evaluating management effectiveness. and their decision-making regarding the management of available cash.

Case study: Apple and effective surplus management

The case of Apple Inc. in 2012 is a clear example of what effective management of surplus treasury is. They managed to use the available cash resulting from the sale of certain products such as the iPhone and iPad to improve the profitability and image of the company.

First, Apple used some of the funds from the excess cash to buy back a certain number of shares of theirs that they had circulating on the stock market. By repurchasing them, they made fewer shares outstanding, so automatically the existing shares, having fewer available, and getting a higher proportion of the profits, increased in value.

Apple then created a dividend payment program to its shareholders. The company had not paid anything for years, and since then, the dividends that Apple distributed to its shareholders have increased. This generated greater popularity and attractiveness to invest in the company, causing shareholder satisfaction and has demonstrated commitment in terms of value creation by the company.

Finally, Apple has become a company recognized for the investment they make in the innovation and design of their products. The use of surplus cash to invest in improving the products themselves demonstrates once again the focus on the mission and vision that Apple has by being product-oriented, but also on the final satisfaction of the consumer.

In short, Apple Inc. has managed to be an example of what effective management of cash surpluses means. They have used many of the strategies that were mentioned earlier in the article, and through this decision making, they have become the giant that Apple is today.


In conclusion, treasury surpluses occur when the cash that a company enters is greater than that which it spends or leaves the company derived from its daily operation. In other words, when the total income manages to cover all the expenses and at the end of the operations, there is a surplus or cash available. There are several ways to take advantage of this money to increase the value of the company, its profitability and the security or satisfaction of shareholders. However, in order to generate positive results from the cash surplus, effective management of said capital is necessary. With surpluses, there are also risks that can harm the performance of the company. In order to have everything under control and to be able to evaluate if the management is being highly effective, a series of metrics are provided to measure the performance of the surplus money. These metrics are commonly used in investments, but since it is very likely that the surplus will be used in investments and company projects, it is essential to make use of these tools.

Snab: Control and effective treasury management

Currently, automation is taking the reins in terms of accounting and treasury systems in order to generate great savings of time and money within companies. The treasury surplus is the final positive result of the additions and subtractions of the money that enters and leaves the entity, which is an extensive process due to the vast number of operations that certain companies have.

Snab is responsible for facilitating all these tasks by automating and centralizing banks, data and treasury in one place. It also offers the traceability of each of the transactions carried out. These characteristics are essential for those companies that seek to reduce errors and increase efficiency in their treasury systems, which will later be reflected in the performance of the company in general.

In the same way, Snab is responsible for eliminating or minimizing the use of Excel or other spreadsheets, since it is responsible for digitizing and automating cash flow statements and other elements that previously had to be done using outdated methods.

In addition, Snab presents other functionalities that help companies optimize their resources and make appropriate financial and strategic decisions. These include process automation, real-time cash control and visibility of upcoming inputs and outputs or synchronization with the ERP.

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