Finance
Treasury Management
The discipline of managing your business's cash: where it sits, how it earns yield, how it moves, and how it is protected from bank and counterparty risk. Sharp treasury practice can add materially to the bottom line without changing anything about the business.
Treasury management is what turns 'my money is in the bank' into a deliberate policy: how much operating cash to keep liquid, how much to sweep into treasuries or money-market funds, how deposits are spread across banks to stay under FDIC limits, and how large payments are approved and moved.
For a small business, treasury usually gets sharper attention after two moments: the first time you accumulate a meaningful cash cushion (typically $500,000 and up), and the first time a bank scare like the 2023 SVB event puts your deposits at risk. Between those moments, the money often just sits in checking, earning nothing.
A basic owner-level treasury policy has four parts: (1) a target minimum operating balance, (2) a rule for where the excess goes (sweep, T-bill ladder, HYSA), (3) an FDIC-coverage plan across two or three institutions, and (4) dual-approval controls on outgoing wires above a threshold. High-net-worth individuals apply the same framework to personal accounts.
The three cash-tier structure most small businesses converge on: an operating tier (2-3 months of expenses in a checking account, zero yield accepted for immediate access); a reserve tier (3-6 more months in a money-market fund or bank sweep, ~4-5% yield); and a strategic tier (surplus above that in a Treasury bill ladder or short-duration bond fund, marginal yield gain plus different bank exposure). Programs like IntraFi ICS/CDARS spread deposits across a network of banks while keeping the whole balance FDIC-insured — the cleanest fix for a business that has outgrown $250,000 at any one bank.
For businesses with foreign customers or vendors, treasury also owns FX exposure: whether to hold euros in a euro account instead of converting immediately, whether to forward-hedge a large future receipt, and how to route incoming wires to avoid double conversion fees. These are decisions the CFO makes and the bookkeeper executes; leaving them to the bank is expensive.
Common pitfalls
- Treating treasury as 'set it and forget it' after opening a sweep; yields, bank health, and your balance mix change and need periodic review
- Confusing FDIC and SIPC protection when your money moves between a bank sweep and a brokerage sweep
- Holding too much cash relative to your obligations; over-conservatism has a real opportunity cost when good yields are available
- Not documenting the policy in writing; when the owner is unavailable, staff need a rule to follow, not a memory to guess at
- Chasing yield into instruments with lockup or NAV risk (long-duration bond funds, corporate paper, uninsured cash-management sweeps) to earn an extra 50bp; a 5% loss on a strategic tier wipes out years of yield differential
Related service
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