- CFO Secrets
- Posts
- ⚖️ The Treasury Management Tug of War
⚖️ The Treasury Management Tug of War
How to balance yield on cash with liquidity
Secret CFO
April 02, 2025
Ramp – the financial operations platform trusted by 30k+ businesses – now offers a modern take on operating and treasury accounts.
For a limited time, SecretCFO readers can earn 5%1 on operating cash in a Ramp Business Account.2 No fees, minimums or transfer limits.
Ramp is not a bank. Bank deposit services provided by First Internet Bank of Indiana, Member FDIC.
Roll up your sleeves
“Seventy million dollars? Just because you ‘need it’?”
“I’m telling you, that’s the minimum buffer to survive our cash swings each month.”
I was a few months into a turnaround, brought in to lead the business out of a cash crisis. This $70m number had caught my eye on day one, but I’d felt there were easier targets to go after in the short term.
But now it was time… $70m was the number baked into the cashflow forecast to account for the ‘ups and downs’ of the cashflow within an individual month, i.e. the assumption was that the cash balance at its lowest point in the month would be $70m lower than the end of month balance. It equated to about 5 days of sales.
Having that sort of luxury buffer was not something we could afford. My VP of Treasury was not used to this sort of scrutiny: “This volatility is standard practice," he explained, shrugging casually, as though $70 million was a rounding error.
But it didn’t sit well with me. We were kicking the hell out of the business to drive DSO down, DPO up, and DIO down. Brutally axing CapEx. Only to find that some of that cash was being used to make life easy for our treasury function.
I asked for a breakdown of the $70m. The answer I got was words, not numbers. Anecdotes: “Well, our largest customer always pays us via ACH every Friday, but the payroll ACH debit hits our account Thursday night. So, we’re always underwater for that 24-hour window. Then, Supplier B has a 2% early-payment discount we’ve historically taken advantage of by paying early in the last week of the month, but it never syncs with our largest inflow days. And we consistently have a quarterly estimated tax payment due around the 15th, which just happens to land right between our biweekly payroll runs and our mid-month vendor payments. Not to mention, our merchant processors hold our credit card receipts for two days before funds hit our account, which can leave us exposed right before weekends.”
I’d heard enough.
“Get some brown paper. Map the monthly cashflow profile day by day. Let’s identify exactly what is driving that $70m. And then work out what we need to do, to at least cut it in half. I want that $35m to bolster our headroom, not to be lost in a daily payment slush fund.”
Turns out they’d never mapped it before. When something doesn’t feel right, grab a pen and some paper, and start to work through the detail, step by step. Map the chaos, and the opportunity will reveal itself.
By the end, we had identified 5 things we needed to do to unlock $40m trapped inside our monthly madness.
They were big things, but for $40m it was worth the effort. And the team got a message that we would look at cash differently in the future.
The Treasury Management Tug of War
This is a Spotlight Edition of CFO Secrets, where we dive into balancing daily treasury management in partnership with Ramp.
At the heart of daily treasury operations is a balancing act. A balancing act between being efficient with your cash and keeping flexibility to react to issues.
Let’s walk through some best practices for managing daily treasury operations:
1) Reconcile daily
It’s boring. It’s obvious. But some things are boring and obvious for a reason. Long gone are the days when it’s ok to reconcile the bank as the first job of your month end. Even weekly is not enough. You need to know your bank history is reconciled to the penny every day. It’s the only way to know you have the latest view of your receivables.
This is a pain in the a** in large companies where there could be thousands of transactions per day. But the good news is that there is no reason this should be a manual task. Automation technology can help take the load off.
Machine learning tools to help categorize transactions have been around forever. A new generation of AI-powered tools is only going to make that easier (with simpler implementations, too).
2) Get the right forecast regimen
Every business should have a 13-week rolling cashflow forecast, updated weekly. It’s how you avoid surprises. It’s how you get familiar with the texture of your business’s cashflows. It’s how you spot issues coming and take actions when needed.
In every crisis I’ve weathered, the 13-week cashflow forecast was my compass. Especially during COVID or crises in business performance. Investors, boards, suppliers, everyone relies on it (even if they don’t see it directly).
It’s not a strategic tool, it’s an operational tool. Built on the direct method.
For a more strategic view of cashflow (to help you direct investment), use an 18-month rolling forecast, updated quarterly (or monthly). It serves a different purpose to the 13-week forecast, and the method is different. The 18-month forecast should be on the indirect method, driven by the P&L and balance sheet assumptions.
But for a business in a tight spot on cash, or with extreme monthly volatility, even these aren’t enough. You will need a 4–6 week rolling daily cashflow forecast. That way, you can plan exactly what day your receivables will land and your payables are due.
3) Reprofile your weekly and monthly flows
Everyone talks about the seasonality of cashflow. Retail businesses with their build up to the holidays. SaaS businesses and annual versus monthly payment plans.
And rightly so. There is real money trapped there. Some of that is efficiency, which can be designed out. But also, some of it is simply inherent in the business model. And the goal is to find the best way to fund it rather than make it vanish.
It’s far less fashionable to talk about the profile of cashflow within the month. There can be real money trapped here, too. That oftentimes gets ignored because we are used to reviewing the financials at a monthly/quarterly/year-end point.
But what happens within the month needs funding too:
a = the annual seasonality of cashflows
b = the weekly profile within the month
c = the daily profile within the week
This business would need to fund a + b + c + buffer. That soon adds up. To change ‘a’ it needs big moves.
But shrinking b & c is more tactical:
Shifting an ACH run by a day or two
Using a payment provider that will fund the ‘in transit’ period
Negotiating with a customer to move a payment forward by a day or two
Yet that short-term volatility gets far less attention.
It doesn’t take many moves to completely transform that monthly profile, and reduce the exposure. In my opening anecdote, we were able to reduce b + c from $70m to $30m with just five moves. A change by a day or two here and there on key customer and supplier arrangements. It also turned out we’d been making our quarterly tax payments a week early just to ‘make sure’ they landed in time.
What those moves are will be different for your business. But the key is to understand the drivers of ‘b’ & ‘c’, and how you can reduce it.
You need to squeeze these inefficiencies out and hold the contingency at the very top, as pure headroom for the business.
The result is a transformation in how you can think about your cash. The amount of flexibility you ‘need’ reduces. Which means you can increase your headroom reserve, invest that cash for yield, or maybe even grow the CapEx envelope.
4) Insure your cash
When thinking about treasury management, there is one thing more important than anything else… the security of your cash. Losing your cash is a great way to get fired.
Every CFO remembers the panic when SVB collapsed. Silicon Valley startups suddenly realizing they’d left millions of VC dollars uninsured and exposed beyond the FDIC’s $250,000-per-bank limit.
FDIC insurance covers only up to $250,000 per depositor per institution. For larger balances, use solutions like Intrafi’s Insured Cash Sweep (ICS), which automatically distributes your funds across multiple FDIC-insured banks to increase your coverage. Alternatively, ensure excess cash balances are collateralized through treasury-backed money-market instruments or repurchase agreements.
If you don’t know the percentage of your cash that is insured by your government in the event of a bank collapse, go find out right now.
5) Know your sh*tcase
Every good CFO knows what their ‘sh*tcase’ cashflow forecast looks like. Or ‘reasonable worst case scenario’ as people more sophisticated than me call it.
Once every generation, something huge shakes us (dot-com crashes, 2008 meltdowns, pandemics). But the ones who navigate it best aren’t prophets, they’re pragmatists.
But what does a ‘reasonable’ worst case mean? What probability event does it cover?
For example, a 10% case means you are funded to 10% probability events over the next 12-18 months, but not 1% probability events.
What’s the difference?
A 10% event is the sort of thing you might expect once every ten years. A major economic downswing, for example. It seems reasonable that you should ensure you are well-funded for that scenario.
But what about a 1% (a 1 in 100 year) event?
Maybe a pandemic is an example here. I don’t think any CFO could be criticized in 2019 for not having the funding in place to withstand a pandemic. 99 years out of 100, they would be capital inefficient.
The detail is very specific to your business. Just be clear on what events your funding is designed to withstand, and which it isn’t. Set clear amber and red warning limits on your liquidity levels. And review forecasts vs these warning limits on a prospective basis.
This will influence how much flexibility you need on hand with your cash, which will influence your deposit strategy.
6) Consider a specialist treasury management solution
There are some great dedicated treasury management solutions out there that automate and solve many of the problems outlined in this piece. The problem? They are expensive, difficult to implement, and only touch the end of the workflow when the drivers of those cashflows happen upstream.
So, these are only really the domain of the largest companies.
I once spent a fortune implementing a treasury management system in a previous role. It took forever to roll out. And while it improved visibility, it didn’t quite deliver what I wanted it to. But for most businesses, dedicating resources (and shelling out hundreds of thousands of dollars) for sophisticated treasury management simply isn’t an option.
This is at least partially why Ramp has rolled out a new treasury management platform for its users. Instead of forcing companies to choose between access and earnings, Ramp integrates cash flow forecasting, automated payables, and competitive rates into one seamless, intelligent system.
I spent time with Subham Agarwal, who leads Product Management and Product Marketing at Ramp, to learn more about how her team is solving one of finance’s most persistent headaches. And to pick the brain of someone much smarter than me about the future of finance and the role tech plays in that.
Meet Subham
As CFOs, it’s easy to neglect treasury management until it becomes a crisis.
Treasury management is full of landmines that eventually end up on the bank statement, where some poor soul has to figure out what the hell went wrong.
While we were busy knee-deep in the cesspool, the product folks (like Subham) smelled an opportunity to find a better path forward.
Let’s meet this brave soul…
"I actually got my start in finance. I was in private equity at Vista Equity Partners for a couple of years. From there, I worked for who I think is one of the best CFOs in tech today—at Square."
"Then I came to Ramp, where I currently build products but also recently took on our marketing organization. On the product side, I oversee all our financial products, reporting, intelligence and budgeting products—essentially the ones that are geared towards the CFO and Treasury persona within our entire stack."
"So I have an affinity and a love for finance professionals because I’ve done that job before. I often joke that I am a recovered addict who now runs the rehab center. I've been clean from Excel for five years now, but I build spreadsheet tech for those still suffering."
Why treasury management?
You’re probably thinking: “why waste all that talent on treasury management?”
Simple… because Ramp noticed their users needed it.
It started with a simple observation (product managers, pay attention!). Ramp saw that customers were hacking together reports to predict their 13-week cash flow forecast:
"Ramp had launched an accounts payable product… and many of the users were already using AP to manage outgoing cash payments. What was happening was our users would log onto the platform and try to use our reporting tab to create odd reports. They’d move things around, and effectively what they were trying to get a sense of was: of all the bills and invoices that had been uploaded into the system, what was going to be due in the upcoming 12 or 13 weeks, and what those total amounts were going to be. And they were doing this every day!"
As Subham and the team dove into the treasury problem, they identified 3 key problems. Perhaps you can relate?
1) Liquidity
2) Finance team workload
3) Days of working capital
Let’s take each in turn:
1) Balancing yield and liquidity
Every CFO's dilemma. We’re forced to choose between liquidity and earning interest on cash.
"The national average yield on a business checking account is about 7 basis points —which is ridiculously low. This is because traditional banking is based on the arbitrage between interest in vs interest out. Ramp doesn’t have that limitation.”
2) Endless work for finance teams
The real victims here are the poor souls in the accounting team who are reconciling the bank statements daily and updating the cashflow forecast.
Subham and her team noticed customers “were spending 45 minutes every day just trying to answer one question: Do I have enough money in my bank accounts to cover my upcoming payments?"
"The real insight here is that finance teams spend too much time doing math, manually tying payments to invoices, mapping bank balances, and checking liquidity. That time should be spent on deciding what to do with cash, not just reconciling it."
3) Working capital
Finance teams are constantly struggling with cash flow timing, balancing payables and receivables while ensuring they have enough liquidity.
"For every payer that we have on Ramp, there’s a payee. The incentive as a payor is to delay the payment as much as possible. The incentive as a payee is to receive the payment as quickly as possible. Cash flow turnover is a tale as old as time. Ramp sits in the middle. We can help both sides.”
The future is now
People like Subham give me hope. That among all the talk of “AI,” “real-time forecasting,” and “CFO 7.0 blah blah blah,” there are smart people out there solving the real problems of finance teams. The things that suck time and mental energy.
So naturally, I had to press Subham on the future of finance and find out what Ramp is going to solve next.
1. AI can fix the repetitive, error-prone work in finance
Many manual processes in finance are completely unnecessary. They exist simply because legacy systems don’t talk to each other properly. This has been promised for a long time, but AI-powered tech actually fixes this.
"If you think about it, why should humans have to manually check for duplicate invoices? Tech should have been able to tell you, ‘Hey, you approved the same invoice 2 days ago on this same computer while sitting at this same desk.’ That’s the world we’re heading toward."
2. The future of finance is smaller, highly specialized teams
As we discussed in the future of finance series, I truly think we’re heading to a world where the finance function is less like a massive army of generalists and more like a lean special forces team.
"We believe that agentic to semi-agentic workflows—where AI systems handle most of the grunt work—will change how finance teams operate. Instead of manually reconciling every bank transaction, the AI will match 95% of them automatically, and a finance professional will only need to step in for edge cases. That means CFOs will spend less time managing processes and more time making strategic decisions about how to deploy capital, scale operations, and optimize financial performance."
3. RIP legacy finance tools and spreadsheets
When I was installing RPA bots 10 years ago and was told they ran on machine learning, I was promised it was the start of a revolution. It was good, but it wasn’t revolutionary. But it certainly feels like this time could be different.
"That’s the difference now—AI isn’t just automating tasks, it’s understanding workflows. The ability for AI to self-implement and self-optimize is a game-changer. Instead of forcing finance teams to spend months configuring a new system, AI will learn from how they work and optimize itself."
"If you step back, we’ve accepted bad finance software for too long. It’s always been clunky, hard to implement, and reliant on finance teams to ‘work around it’ instead of working for them. That’s what’s finally changing."
Net-net
High yield deposit accounts are nothing new. What is novel is combining it with an AP workflow, meaning that more of your cash can sit in high yield accounts for longer. Maybe the age-old tug of war between yield and liquidity has become two uses of cash rowing in the same direction.
I want to thank Subham and the Ramp team for helping me deep dive into the treasury management dilemma and sharing their thoughts on the future of finance.
Still earning 0% on your operating cash?
Stop letting your bank pocket the profits on your cash. Ramp Treasury lets you maximize your returns on operating cash, maintain liquidity, and minimize the hassle of paying bills on time.
For a limited time, SecretCFO readers can earn 5%1 on operating cash when you open a Ramp Business Account.2
Ramp is not a bank. Bank deposit services provided by First Internet Bank of Indiana, Member FDIC.
If you enjoyed today’s content, don’t forget to subscribe.
Ramp Disclaimer:
1. For a limited time, Ramp will pay 5% in cash rewards on up to $1M deposited in a Ramp Business Account. Deposits above $1M will receive 2.5% in cash rewards from Ramp. Offer is only valid for Ramp prospects, and existing Ramp customers who have never opened a Ramp Business Account. Prospects must apply for a Ramp Account by 5pm ET on April 30th, 2025, and must open a Ramp Business Account by 5pm ET on May 31st, 2025. Existing Ramp customers must open a Ramp Business Account by 5pm ET on April 30th, 2025. Earn 5% in cash rewards from Ramp for 6 months, starting from the day you open your Ramp Business Account. After 6 months, your cash reward reverts to 2.5%. See offer details here. Cash rewards are paid by Ramp Business Corporation and not by First Internet Bank of Indiana, Member FDIC. Cash rewards are subject to change. See the Business Account Addendum for more information.
2. Ramp Business Corporation is a financial technology company and not a bank. Bank deposit services provided by First Internet Bank of Indiana, Member FDIC.
Secret CFO Disclaimer:
Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.
Reply