To many people, treasury management can seem rather dull and time-consuming. However, this effort in the short term is crucial if a business is going to prosper in the long term.

Meeting your commitments

Good treasury management allows businesses to honor their financial obligations on time. It ensures that business owners can pay all their costs, such as staff salaries, supplier invoices and corporate taxes.

Efficient cash management also requires clear visibility of a company’s cash flow. By identifying where and when cash comes in or goes out, businesses can make more informed decisions and financial savings.

Protecting your business from a suspension of payments

Poor treasury management can lead to a highly damaging domino effect.

When a company does not have enough cash in its treasury, it is unable to honor its short-term debts (loan repayments, rent, salaries, supplier costs etc). It finds itself in a suspension of payments and what are known as its ‘current liabilities’ (its debts) are greater than its ‘assets available’ (its treasury).

This suspension of payments must be declared to a commercial court within 45 days of the failure to make payment. The court may then decide to initiate a collective proceeding: either legal redress or judicial liquidation.

  • In the case of a legal redress procedure, a judicial proxy is appointed to help the business owner to find solutions that will allow activity to recover. If the business is judged to be capable of recovery, a redress plan is put in place.

  • In instances of judicial liquidation, activity is stopped for good, the company is liquidated and the proceeds go towards paying outstanding creditors.

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