As a quick definition, Treasury, or Treasury management to be more precise, refers to the daily management of cash or money inflows and outflows of a company or business organization. This, therefore, refers to the daily management of collections, payments of a company, as well as the current cash management of the company and the forecast of the future situation based on the future of the company and the economic context in the one who finds the same. On a larger scale, a company’s cash management can translate into more complex activities such as managing advance collections, obtaining loans or lines of credit, financing investment activities, managing risk coverage such as fluctuations in exchange rates or interest rates, etc.

For this reason, the level and sophistication of Treasury management varies from company to company, depending on size, sector, capital needs, etc.

To contextualize, it will not be the same, for example, the Treasury management of a Bank, which has to analyze its situation of deposits, loans and maturities of these, than the Treasury management of a small store that charges for the sale of its products. cash. The complexity therefore can vary infinitely from company to company.

The word Treasury comes from Latin and is not of Anglo-Saxon origin, unlike most of the financial terms we use today. For example, in the region of Provence “Thezauraria”, in Spanish the Treasury, or “trésorerie, “treasure house” in France. The definition of the French Academy is probably one of the oldest, dating from 1835. “A trésorier” or Treasurer, is a person who manages the finances of a company or an association. The Treasury also referred to the public place where public funds were managed and administered.

The historical moment experienced in 2020, with the arrival of the global crisis derived from the SARS-CoV-2 Pandemic (COVID -19), had implications of an unprecedented magnitude for treasury management. Until then, treasury management was not on everyone’s lips, and even I would say its importance was underestimated.

However, the arrival of the Pandemic at the beginning of 2020 meant that many companies were affected in a matter of days and weeks, going from billing large amounts to billing practically zero in a few days. Take, for example, the case of Airbnb, the leading global platform for renting flats and vacation accommodation. From one day to the next, all of his clients began to cancel their trips, spending his income of several billion dollars to nothing in March and April 2020. Not only that, but he had to start returning money to the “hosts” of the flats due to the cancellation of the stays.

As one can imagine, the following months must have been a drama for the managers of Airbnb to be able to save the company. To survive, the company had to lay off 25% of the company, or put another way, 1,900 employees. In that period, the finance and treasury team was consequently forced to refinance any existing debt and close an investment round, among other things.

In short, this case was not isolated, similar cases took place in sectors such as hospitality, airlines or tourism, among others.

During the Pandemic, our personal experience before Snab turned into managing the treasury on a daily basis, submitting treasury reports and forecasts to the board of directors twice a week, and carrying out extensive daily monitoring of suppliers, customers, means of financing etc.

Today the profile of the Treasurer is not perfectly defined. Since it depends a lot on the size of the company, and the sector in which it operates. In short, treasury management and its sophistication and specialization within the company will depend on how complex the company’s operations are. A company with a high volume of collections, payments, and financing lines, among others, is not the same as another that hardly has payments and collections, nor any line of credit or financing. That is why we can currently identify several profiles that usually fulfill the role of treasurer:

The specific role of chief treasury of a company today is still rare. This generally exists in companies that have already reached a certain size, or that are purely dedicated to managing money on a large scale, such as a bank or a payment method company. In large companies, this role is becoming common, since the treasurer is mainly in charge of managing capital needs, the relationship with banks and with alternative sources of financing, among other functions.

Nowadays, in smaller companies, the financial director performs a bit of all the roles that exist within the financial department. As the person in charge of finances, this person combines accounting tasks with collection management tasks, payments, budgets and treasury forecasts, among other financial tasks.

In small businesses, or startups, the founders are usually treasury experts. Part of his day-to-day work corresponds to talking with investors to raise financing, making cash forecasts based on sales, customer collection periods and supplier payment periods, salary payments, etc. In this type of business, the treasury becomes even more important, due to the impact it can have on the business. A month without cash, can close the business. Since many small businesses live from day to day, the importance of good treasury management plays a fundamental pillar in the company.

The number of functions that a treasurer can perform today has increased exponentially. Among the most important we could highlight the following.
– Management of the relationship with suppliers and customers
– Management of the relationship with banking institutions and alternative financing sources
– Analysis of investment projects, analysis of their viability, and analysis of the most efficient source of financing to carry out said project. For example: do we finance this project through an investment round or do we finance the project with bank debt, or with a bond issue? These are the types of questions a treasurer would ask before making an investment.
– Analysis of supplier payment periods and customer collection periods.
– Analysis of cash forecasts based on future payments, collections and the current cash status.
– Management and analysis of exchange rate and interest rate risk coverage

Good treasury management means having a clear, faithful and real image of the company’s treasury situation at all times. However, today it is not easy at all. Finance teams currently rely on manual tasks, and lack the right tools to have adequate visibility into the cash situation. For us, having a true image means having access to your banking positions in real time, having cash forecasts for the next 12 months, having a vision of the company’s sales and forecasting the collection of said sales, having a perception of the delays in collections, have greater control and speed capacity in the payment process to suppliers, have a forecast of macroeconomic risks, be aware of how much cash the company consumes month by month, etc. All this will make the treasurer, financial director, or businessman, have a global and real vision of the company’s treasury. Something vital in these times.

A bad management of the treasury, or a “no management” of the same, can have great negative repercussions for the company. Several delays in payments to suppliers can worsen the relationship with them. A delay in collections from customers can cause a company to default on certain company obligations, such as paying workers, or to be late in paying a debt due, or paying taxes, social security, etc. Any error in treasury management can cause a negative spiral that can lead to the closure of the company in the worst case.

A financial model generally refers to a file in Excel format in which the numerical situation of the company is reflected and a future forecast of the company’s situation is made, taking into account certain assumptions or hypotheses of the future behavior of the company. That is, a % increase or decrease in sales, costs and other hypotheses such as inflation will be estimated. The main objective is usually to create an image in Excel of the company and the expected performance in order to make strategic decisions. Generally, financial models try to make forecasts of more than 2 years, up to 5 years for companies in standard sectors, and projections of 20 or even 30 years for companies in sectors such as infrastructure, where flows tend to be more constant.

Short-term Liquidity models, as their name indicates, try to analyze the company’s situation in a shorter period, unlike financial models. Generally this analysis consists of a 1-year analysis. The main difference is that being much closer to the current date, this type of model is usually much more detailed, and includes forecasts or estimates of collections, and payments much closer in time, which allows estimating in a way more precise. In addition, these analyzes typically start from current cash balances, and usually include extraordinary payments or collections.

Another analysis exercise typical of treasury departments is customer analysis and supplier analysis. In the first, the objective is to determine the financial capacity of customers and the period for them to pay their bills. Sometimes, for a company, it is more valuable to have a client who pays on time, than a larger client who always pays late, and who always has to be chased. This is mainly due to the fact that, until the moment of collection, the company is financing all the cost associated with said client, which can lead to treasury tensions if the company does not have excess liquidity. In addition, the analysis is important to avoid giving service to clients who are on the verge of closing, since at any time this can cause a non-payment on their part. In the second, that is, in the supplier analysis, the analysis focuses on identifying the negotiated payment period, trying to lengthen it as much as possible. Among other analyses, it seeks to identify possible discounts for prompt payment or for purchasing larger quantities.

Snab is a pioneering platform in Europe that automates and digitizes treasury management. Not only does it allow you to have real-time visibility of the status of your banks, and future payments and collections, but it also provides you with real-time reports and future forecasts of the company’s cash status. Snab gives you control and visibility over the treasury that hasn’t existed until today, as there are no specific treasury platforms that perform the tasks that Snab allows.