One of the main challenges for companies’ treasury departments is to anticipate future liquidity needs . And an essential tool to achieve this is the treasury plan, which allows those responsible for a company to anticipate liquidity challenges and ensure the necessary cash flow through short-term income and expense projections.

Below, we will explore in detail what a treasury plan is, its importance and how to create it step by step.

How to make a treasury strategic plan?

Making a complete treasury plan is a task that is sometimes somewhat complex. Below, we explain how to do it.

Step 1: Analyze the current financial situation

Before you start projecting cash flows, it is essential to have a clear picture of the company’s current financial situation . Financial statements, such as the balance sheet, income statement, and statement of cash flows, must be collected and analyzed. This will provide a solid basis for future projections.

Step 2: Establish projection periods

Determines the time period that the treasury plan will cover. Generally, a short-term horizon is used , such as one or two years, although this can vary depending on the needs and nature of the company. It is important to take into account business cycles and typical payment and collection deadlines to ensure an accurate projection.

Step 3: Identify sources of income and project them into the future

In this step, all sources of cash inflows must be identified and detailed . This may include sales of products or services, investments, loans, grants or other sources of financing. It is essential to take into account the payment conditions associated with each source of income, such as payment terms and conditions.

In an Excel sheet or treasury software, all sources of cash inflows should be reported, as well as the values ​​expected to be obtained in the future.

Step 4: Estimate expenses and project them into the future

The next step is to estimate and break down all the cash outflows that the company will have to face during the study period. This may include operating expenses, salaries and benefits, debt payments, taxes, production costs, marketing and any other relevant expenses. It is important to be realistic and consider both fixed and variable expenses.

This step is possibly one of the most complex, since it is difficult to estimate in advance what the cash outflows will be, especially in everything that has to do with variable costs.

Step 5: Include taxes

To complete the treasury plan, you must integrate the movements related to corporate tax and other taxes such as VAT. These costs should not be underestimated, as they can represent substantial expenses for the company. To predict them, you can obtain the data according to historical information. This way you will avoid omissions.

Step 6: Assess liquidity and make decisions

Once cash flow has been projected, it is important to evaluate the company’s liquidity at different times and situations . Identify moments of greatest need for cash and look for opportunities to optimize financial management, such as renegotiating payment terms with suppliers or improving efficiency in accounts receivable management.

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