4 min read

Cash Management vs. Treasury Management: What's the Difference?

By Matas Pranckevicius

Content Manager, Relay

Cash management and treasury management are often used interchangeably, but there are differences between them, and the scope of treasury management is much larger.

As a business owner, it’s important that you know the difference between cash management and treasury management as your business grows — and especially if you plan to outsource either component.

In this article:

In this post, we’ll cover both cash management and treasury management and the differences between the two. We’ll also discuss why cash management is important and how your business bank can help. Let's dive in.

What is treasury management?

Treasury management involves managing your business’s cash flow and making smarter large-scale decisions. It involves governing your liquid cash, investments, credit lines, and other assets. Importantly, treasury management helps you as a business owner mitigate your business’s financial, operational, and reputational risks.

Treasury management is usually handled by the CFO, the VP, the Director of Finance, or the company's Treasurer. On a day-to-day basis, treasury management may be administered by the controller or other accounting staff. 

Why does treasury management matter?

Treasury management is about a lot more than simply monitoring your revenue and spending. Think of your company’s treasurer as a financial advisor. They look closely at your industry, the economy as a whole, and potential obstacles as a whole, and better help the company prepare for the unexpected and make more informed decisions. For example, nobody saw the pandemic coming. But companies on top of their treasury management would’ve had some cushion to protect them from the financial blow.

Need help navigating the unexpected? Check out our guide on How to Survive and Thrive in 2023

As you can see, treasury management is about knowing where you currently stand and positioning your business for a better future. Risk management is a big part of it. Treasury management involves forecasting any potential financial risks to ensure the company can meet its financial obligations and ensure predictable business performance. The aim is to identify and address any risks that could significantly impact the business goals. It reveals to businesses how they can manage their money more intelligently.

While treasury management and cash management are sometimes interchangeable for some, they’re not the same thing.

What is cash management?

Cash management is a sub-function of treasury management. It refers to the day-to-day handling of cash inflows and outflows to meet payment obligations, plan for future payments and maintain financial stability. It’s a pillar of a financially healthy business.

In addition to dealing with payment transactions, managing cash flow includes bank account organization, managing bank accounts, reviewing internal controls, monitoring working capital (including receivables and payables) and moving funds as needed. It is helpful to regularly utilize your cash flow statement, as well as liquidity and solvency ratios (which reflect your ability to meet long-term financial obligations, like debt repayment), to spot issues.

Why does cash management matter?

Maintaining a healthy cash balance is important because every company must meet its short-term financial obligations when they come due. This means always having the necessary liquid cash on hand. Do you have debt (either credit cards or loans) to pay off every month? Do you have the necessary money available for this? What about the rest of your business’s bills? When do they come in, and will you have the liquid cash available to pay them on time?

Cash management also helps you better understand what’s left over after everything is paid for, and treasury management will help you understand what to do with that money. For instance, you want plenty of runway so that your business could, theoretically, continue running for several months even without earning a dime. Beyond that, excess cash should be put to work earning interest rather than sitting idle.

Usually, cash and treasury management are typically handled by the same group of people within a company. Otherwise, the Chief Financial Officer or Vice President oversees treasury operations while the accounting team is assigned cash management responsibilities.

What’s the difference between cash management vs treasury management?

While both treasury and cash management involve monitoring business liquidity, mitigating risk in some way, and maintaining cash flow, treasury management’s scope is more expansive, including the company’s funding and investment activities. 

Cash management is one critical treasury management function and should be monitored closely by business owners.

Why is cash management important to your business?

Cash management is important because having the right amount of cash in the right place at the right time is key to the survival of any business. Keeping up with your financial obligations ultimately helps your business maximize earnings and your bottom line.

Cash flow issues are one of the top reasons businesses fail, so cash management should be a priority in any industry. You can start by creating a budget, setting up the proper bank accounts and forecasting the future.

Better understand your business cash flow with Relay

Because banks and other financial institutions typically have custody of cash assets for businesses, they play a significant role in cash management and offer banking services to help suit your business needs. 

At Relay, we know that proper cash management helps grow successful businesses. We’re here to help you get your cash flow in order and streamline your cash flow management.

Our online banking and money management platform puts you in complete control of your cash flow. Accept deposits from your favorite payment processor and payments via ACH, wire or check. Organize and allocate income for day-to-day expenses and payroll with up to 20 checking accounts and automate transfers into each account using dollar amounts or percentages.

Furthermore, you can use a variety of operating accounts to better organize your expenses — for example, by inventory, supplies, travel, taxes, and so on. Doing so helps you better understand, both at a glance and in-depth, if you’re on track with your financial commitments, what kind of liquid cash you have, and what’s left over.