THE VALUE OF TREASURY MANAGEMENT
treasury to include cash, risk, payments, and working capital increase its value to the enterprise?
“Poorly managed treasury can have a big negative effect
on enterprise value. Companies don’t go bankrupt because
they report bad numbers. They struggle because they run
out of cash.”
If you want to feel the pulse of a company, dig into treasury. That’s where you will see what’s happening. Accounting and financial reporting often tend to be after the fact. You record what happened, but there’s nothing you can really do about it because it’s not actionable. Treasury is where you can really feel the lifeblood of the operation, and a big part of that is looking forward. You’re trying to preemptively avoid any type of risk: You are engaged in liquidity planning.
Treasury plays a crucial role in creating value in the business, whether it’s managing liquidity to support internally funded initiatives or enabling borrowing or buying back stock. That forward-looking perspective helps avoid issues that can negatively affect value. The flip side of the value
question is that poorly managed treasury can have a big negative effect on enterprise value. Companies don’t go bankrupt because they report bad numbers. They struggle because they run out of cash. Anticipating liquidity needs and having access to liquidity in the right place and at
the right time is crucial.