Finance - Treasury

The second function of Finance to be managed by a company’s Chief Financial Officer is to serve as the Treasurer of the business, which represents and externally focused function.

This post follows from the previous examination on the internal functions of finance covered in Finance - Leadership.

Assuming the role of a company’s Treasurer means focusing on the financial relationship of the business with outside parties, namely the local government and tax authority. 

In this way the Chief financial Officer of any organization must possess the flexibility to switch mindsets between thinking about the business from within and outside, particularly during the financial reporting season. When tax filings are due, the CFO must properly record all of the economic activities and transactions related to the operations and the business, and anticipate how tax authorities will interpret the records.  

Overtime, as a business grows the role of the CFO and the Treasurer can be managed by separate individuals. But, they must always work in close concert and have a likeminded perspective of the business.  

In preparing a company’s financial statements for tax authorities a CFO must be aware of the following responsibilities:  


Function 7 - Treasury & Tax


This role requires that a CFO be aware of the external financial regulatory environment. Understanding the current laws, regulatory trends, relevant topics driving reform and industry leaders is essential.  The Treasurer/CFO must be able to maneuver the business in the best possible way to protect its assets and minimize the potential for capital being lost or incorrectly disclosed. 

Typically, the position of Treasurer requires a high level of conceptual and strategic thinking, and mastery of the international financial markets. Thankfully, and particularly for early-stage businesses, few people are required to effectively manage this function.

The responsibility of the Treasurers includes addressing the foreign exchange structure of your company to ensure that the economic results and reporting of your business are consistent with the markets you operate in. Financial leaders should look to how successful industry counterparts record the financial events of their business, and emulate those who are praised for their sound fiscal management.  

In addition, Treasurers should have an excellent grasp of the equity or capitalization table of your company, where the company has flexibility to issue debt or repurchase stock, and how easily the equity can be moved or converted into cash, options, etc. 

Lastly, the Treasurer/CFO must have a comprehensive mastery of the tax system the business operates in.

Financial managers must comprehensively understand the multi-faceted purpose of the Treasury to best represent and position their company for sustained economic success. 


The Critical Purpose of Treasury & Tax:


  1. To manage the debt vs equity solvency of the company.

  2. To manage how the company leverages their economics, and cultivate a strong relationship between the company, it's bank and outside agencies. 

  3. To, overtime, produce a positive yield curve for the company's borrowing portfolio, so that the business can easily borrow capital when necessary.   


In order for financial managers to hedge their assets, a central clearing unit (an intermediary service to transfer funds between different financial institutions) is required to conduct the following operations:


  1. Establish a net amount & notary system, as it is the lowest cost way to manage Foreign Exchange.

  2. Use your assets to engage in swaps within the FX market.

  3. To hedge your profits / balance sheet / etc… in order to reduce the potential for future loses or gains suffered by the company.


To ensure the economic success of the business financial leaders should be conservative in the way they manage the treasury, and exercise extreme caution when hedging company assets in the market.  

Typically, foreign exchange is the least impacted by economic fluctuations across markets.

Nevertheless, the Treasurer/CFO should take advantage of mismatches between different exchanges, asset values, and investments as they are easy opportunities to grow capital. 

Wherever there is a tax or exchange rate advantage, financial leaders should consider keeping money outside of the United States where it is not taxed until repatriated. The best financial managers always find creative ways to protect their company's assets.

Lastly, in an economic crisis the CFO and Treasurer of your business must be aware that many financial instruments, (particularly newer ones, ex: C.D.O.s) typically behave unexpectedly and/or fail, while older and safer instruments (ex: bonds) behave as anticipated. 


All things considered, financial managers should always prepare for the worst, and keep executive expectations low.

It is far better to exceed muted expectations than to underachieve against high expectations. 

The role of finance is to minimize the risk for potential economic loses. So always approach your finances conservatively. This applies even more so for Start-ups. 

Sound and conservative judgement is the most important trait executive leaders should seek when determining who should fulfill the role of CFO and/or Treasurer.

Lastly, always allow the CFO and/or Treasurer to be an active participant in the brand strategic decisions of the company. Their expertise can illuminate creative ways to manage company assets to support the short and long-term operations of the business. 

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