How to set up a proper treasury function for a mid-sized company

A treasury function — managing your company's cash, investments, foreign exchange, and banking relationships — is often handled informally (the founder or CFO makes decisions case by case) until the amounts involved make the informality costly. At ₹20Cr+ revenue, a structured approach to treasury pays for itself.

Cash management is the core. Your treasury function should know, at all times: your total cash position across all bank accounts, your committed outflows in the next 30 days, and your expected inflows in the next 30 days. The 13-week cash flow forecast (discussed earlier) is the primary tool. The treasury function uses this to ensure you're never in an avoidable cash shortfall and never holding excess cash at zero return unnecessarily.

Short-term investment of surplus cash: cash sitting in a current account earns no return. A reasonable treasury policy: operating cash (enough for 2–3 months of outflows) in the current account or savings account, surplus cash in liquid mutual funds (redeemable in 1 day, yielding 6–7%), and any cash with a known horizon of 3+ months in short-term FDs or arbitrage funds. The decision to invest should be governed by a policy, not made case by case.

Foreign exchange management: if you have revenue or costs in foreign currency, exchange rate movement affects your profitability. For exporters, rupee appreciation reduces the INR value of export revenue. For importers, rupee depreciation increases INR cost. Hedging through forward contracts or options reduces this risk for planned transactions. At smaller volumes, simply having a forex policy — when you convert, through which bank, and whether you hedge — reduces unnecessary losses.

Banking relationship management: as discussed, your banking relationships are strategic assets. Treasury should maintain the bank relationship map — which bank provides what facility, what the limits are, what the rates are, and when reviews are due — and manage these relationships proactively.