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.

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.

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.