March 3, 2025
In the UK, approximately 20% of small businesses fail in their first year, often due to poor cash flow management. Effective treasury management can help prevent this and support your business's growth. 1
Here's a guide to get started:
Treasury management involves safeguarding cash, ensuring liquidity, and making every pound work harder for your startup. Let's explore how to implement these steps effectively…
Managing cash flow is fundamental to treasury operations. With 57% of UK small businesses experiencing cash flow issues, staying on top of it is crucial for startups to thrive. 2
"Cash flow planning is essential: you need cash in the bank to pay your bills. Staying on top of your cash flow will help you see if you're going to run out of money—and when—so you can prepare ahead of time." 3
Creating detailed cash flow forecasts helps anticipate future financial positions and make informed decisions.
Efficient working capital management supports your cash flow forecasts. Focus on these areas to keep operations running smoothly:
Receivables Management:
Payables Optimisation:
Real-time insights into working capital help refine your cash flow strategy further.
Utilising tools that provide real-time cash insights can enhance your ability to manage finances effectively.
Key actions to take:
After organising your cash flow, structure your bank accounts for better control and transparency. A solid bank account setup is essential for managing your finances effectively.
Choose banks that cater to startups and offer modern digital solutions. Evaluate the following factors:
Once you've chosen the right banking partners, set up your accounts to manage funds more effectively.
A clear account structure simplifies cash flow management and ensures funds are allocated appropriately. Consider establishing:
If your business operates internationally, managing multiple currencies is also important.
Once you've organised your accounts, it's time to make your idle cash work harder. By investing strategically, you can align your cash flow and account setup to ensure every dollar contributes to your startup's success.
Consider dividing your cash into two categories: operating funds (needed within 6–8 months) and strategic reserves.
Keep these principles in mind and ensure you seek expert financial advice beforehand:
"Given the rate environment today most (pretty close to all) of our clients keep their excess investable funds in our bank money account which is an interest bearing savings account. It's fully liquid and provides a small yield... Most startups don't want to tie up cash for more than 6-months and their board approved investment policies are very focused on capital preservation as opposed to yield." John Benetti, Comerica Bank 4
To strike the right balance between liquidity and yield, consider the following:
Once your cash flow and investment strategies are in place, the next step is managing financial risk. This is critical for startups aiming to preserve capital while scaling 5.
Here are some common treasury risks and how to address them:
| Risk Category | Description | Potential Mitigation Steps |
|---|---|---|
| Bank Concentration | Over-reliance on a single bank | Spread funds across multiple institutions with FSCS protection |
| Cash Flow | Insufficient operational funds | Keep emergency reserves and set up credit lines |
| Currency | Exchange rate fluctuations | Hedge international transactions |
| Fraud | Internal or external theft attempts | Use dual controls and multi-factor authentication |
"You need to have a good strategy for your capital journey to ensure you have enough cash to reach the milestones necessary to attract new investors", says Håvard Lindtvedt, Head of Nordea's Startup & Growth unit in Norway 5.
Once risks are identified, the next step is putting effective controls in place.
Here’s how to safeguard your funds:
Regulatory compliance can be demanding for smaller businesses. Stay ahead by:
The risks of neglecting these measures are real. For example, Mattel lost $3 million to scammers in China after falling for a fraudulent invoice 6.
"If you don't already have the internal systems in place for financial reporting and forecasting, it can be very difficult and expensive to start doing it when you're already in the growth phase", warns Riku Tiainen from Nordea, Startup & Growth 5.
Modern treasury software can help smooth financial operations by automating workflows and providing real-time insights.
When choosing treasury management software, look for features that align with your business needs. Here are some key areas to focus on:
| Feature Category | Key Capabilities | Business Impact |
|---|---|---|
| Cash Management | Real-time visibility, automated pooling | Instant access to cash positions across accounts |
| Forecasting | AI-based predictions, trend analysis | Accurate cash flow forecasts up to 12 months ahead |
| Integration | API connectivity, multi-bank support | Smooth connection with banks and ERPs |
| Risk Management | FX exposure tracking, fraud detection | Automated risk monitoring and alerts |
Once you've selected the right software, the next step is to automate routine treasury processes.
Automating treasury tasks can significantly cut down on manual work. For instance, a company managing 10,000 annual user requests saved 625 person-days by adopting automated workflows 8. Focus on automating these critical areas:
Take Round Treasury as an example - it automates cash flow processes, connects with over 2,000 bank accounts, and delivers real-time insights alongside financial recommendations.
For smooth operations, your treasury platform must integrate seamlessly with other financial systems. Key integration points include:
Test all integrations thoroughly to confirm that data flows smoothly across your existing systems 9.
Managing your treasury effectively is all about mastering the basics. Here’s a breakdown of the essential areas to focus on:
| Focus | Key Actions | Expected Impact |
|---|---|---|
| Cash Flow Strategy | Define strategic vs. operating cash, forecast monthly needs | Gain a clear view of funds available for operations and growth |
| Bank Structure | Set up accounts with institutional banks, maintain operating cash | Improve security and streamline cash management |
| Investment Approach | Build an investment ladder, focus on short-duration assets | Achieve better returns while keeping liquidity intact |
| Risk Management | Diversify client base, monitor market trends | Lower exposure to financial risks |
Review your treasury setup quarterly, update your forecasts regularly, and document all decisions for audit and regulatory purposes. Doing this should provide a solid foundation to optimise your treasury right away. Good luck!
