Corporate Treasury Management for SMEs and Family Offices

Treasury management is often thought of as something only large corporations need to worry about. In practice, the principles that underpin corporate treasury — disciplined cash flow visibility, appropriate bank facilities, FX exposure management, and the separation of operating cash from strategic reserves — apply equally to a family business with £5 million in turnover and a family office managing £20 million in assets.

The difference between well-run and poorly-run business treasury is often not the complexity of the instruments used but the consistency of the disciplines applied. This guide covers the core disciplines in practical terms.

Segregating Operating Cash from Strategic Reserves

The first and most fundamental treasury decision is the separation of cash that the business needs for operations from cash that is being held as a strategic reserve or pending deployment.

Operating cash is working capital — the funds needed to pay suppliers, staff, and overheads within the normal payment cycle. It must be instantly accessible, held at the business's primary bank, and sized to cover the business's shortest payment cycle plus a buffer (typically four to eight weeks of operating costs).

Strategic reserves are any cash held beyond operational needs — retained profits awaiting reinvestment, liquidity buffers held against specific risks, or cash generated from a business sale or refinancing that has not yet been deployed. This cash should not be sitting in a non-interest-bearing current account. It should be structured in notice accounts, fixed-term deposits, or short-dated bonds, earning a return commensurate with its actual accessibility requirements.

Failure to make this separation is extremely common among SME owner-managers, who often keep everything in a single current account by default. The cost in foregone interest income can easily reach tens of thousands of pounds annually for businesses holding £500,000 or more in cash.

Cash Flow Forecasting: The 13-Week Rolling Model

The foundation of effective treasury management is a reliable cash flow forecast. The standard tool is a 13-week rolling cash flow — a week-by-week forecast of cash receipts and payments over a three-month horizon, updated weekly.

The 13-week model is used because it covers a quarter — the typical reporting and payment cycle for VAT, PAYE, and corporate tax payments — whilst being short enough to be reasonably accurate. It is "rolling" because each week, one new week is added to the end as the previous week falls off, maintaining a constant 13-week forward view.

A well-built 13-week model includes:

Receipts: Customer payments (by debtor age, not invoice date), known recurring income, intercompany transfers, financing proceeds.

Payments: Supplier invoices due (by payment terms), payroll dates, VAT payment dates, loan interest and principal, any anticipated large outflows (capex, acquisitions, professional fees).

Net cash position: The running balance at the end of each week, highlighting minimum balance points.

The model's primary use is identifying upcoming periods of cash constraint before they arrive, giving management time to draw on credit facilities, accelerate collections, or defer non-urgent payments. Without it, many businesses first become aware of a cash shortage when their payment is returned.

For family offices, an equivalent model covers investment drawdown dates, property costs, personal drawings, and any large planned expenditures.

Bank Relationship Management: Primary and Secondary Banks

A well-structured banking relationship for an SME or family office typically involves a primary bank and at least one secondary bank.

The primary bank holds the main current account, provides the principal credit facility (overdraft or revolving credit facility), and is the institution the business interacts with daily. The relationship with the primary bank should be maintained at relationship manager level — not transacted exclusively through online banking — because access to a named contact is essential when a credit decision or urgent request arises.

The secondary bank serves multiple purposes: it provides a FSCS diversification point for cash holdings above the £120,000 per-person, per-firm deposit protection limit (raised from £85,000 on 1 December 2025), it gives the business competitive leverage when negotiating with the primary bank, and it provides operational resilience if the primary bank experiences a service disruption or, in extremis, a credit restriction.

Some businesses also maintain a third relationship with a specialist provider — for example, an international bank for FX and cross-border transactions, or a digital challenger bank for efficient multi-currency accounts.

Negotiating Credit Facilities: Overdraft vs Revolving Credit Facility

Most SMEs begin their banking relationship with an overdraft — a simple borrowing facility attached to the current account that allows the balance to go negative up to a defined limit. Overdrafts are flexible but expensive: typical rates are base rate plus 4–6%, and they are repayable on demand. They are appropriate for short-term, bridging cash needs.

For businesses with recurring working capital requirements — seasonal businesses, businesses with long debtor payment cycles, or businesses funding a period of growth — a revolving credit facility (RCF) is almost always preferable. An RCF is a committed facility: the bank cannot withdraw it during the facility period (typically 12–36 months) without cause. It is drawn down as needed and repaid as cash is received, with interest charged only on the drawn amount. Pricing is typically base rate plus 2–3.5% for creditworthy SMEs.

When negotiating a facility, the key terms to focus on are:

• Commitment period: How long is the facility committed? A one-year committed RCF is far more valuable than an evergreen overdraft that can be withdrawn on 30 days' notice.
• Financial covenants: What metrics must the business maintain (revenue, EBITDA, leverage ratio)? Covenant breaches trigger a technical default — negotiate headroom appropriate for the business's variability.
• Security: Is the facility secured (against assets or personal guarantee) or unsecured? Negotiate to minimise personal guarantee exposure.
• Drawdown mechanics: How quickly can the facility be drawn? For operational use, same-day drawdown is essential.

FX Exposure Management

Any business that buys or sells in a currency other than its functional currency has FX exposure. The risk is that exchange rate movements create unbudgeted costs or erode profit margins.

The starting point is a currency exposure map: for each currency, what are the expected inflows and outflows over the next 12 months? Natural hedging — where inflows and outflows in the same currency offset each other — is the cheapest and most efficient form of FX risk management. For example, a UK business that receives USD from export sales and pays USD for imported materials has natural hedging between those flows and may only need to manage the net exposure.

For residual exposures, the primary hedging tools are:

Forward contracts: An agreement to buy or sell a defined amount of currency at a fixed rate on a future date. Eliminates rate uncertainty for the hedged amount. Typically available from banks and specialist FX brokers for terms of 1–24 months. Appropriate where the timing and amount of the exposure are known with reasonable certainty.

Currency options: The right (but not obligation) to exchange at a defined rate. Protects against adverse rate movements whilst retaining upside if the rate moves favourably. More expensive than forwards due to the option premium.

Spot transactions via a specialist FX broker: For one-off transactions, using a specialist broker (Moneycorp, Currencies Direct, Global Reach) rather than a clearing bank typically achieves a meaningfully better rate and lower fees.

The level of FX hedging appropriate for any business depends on its margin, its ability to pass on currency costs, and its risk tolerance. A business operating on 10% net margins is far more exposed to a 5% adverse currency move than one operating on 40% margins.

Accounts Receivable Management and DSO

Days Sales Outstanding (DSO) — the average number of days taken to collect payment after invoicing — is one of the most significant drivers of cash generation or consumption in a business. A business with £500,000 of monthly revenue and a DSO of 60 days has £1,000,000 tied up in debtors. If DSO falls to 45 days, £250,000 of cash is released.

Practical DSO management includes:

• Issuing invoices immediately upon delivery (not at month-end)
• Clear payment terms stated on the invoice and agreed at the point of sale
• Automated payment reminders at 7 days before due, 1 day before due, and 1 day after due
• A defined escalation process for overdue invoices
• Credit checking new customers before extending significant credit

Invoice finance (invoice discounting or factoring) allows businesses to receive the majority of the invoice value immediately upon issuance, with the balance paid when the customer settles. This dramatically reduces DSO and can transform the working capital position of a business with long payment cycles, though it comes at a cost (typically 1–3% of invoice value, plus arrangement fees).

Transfer Pricing and Intercompany Loans in Group Structures

For businesses operating through multiple legal entities (common in property investment groups, family business structures, and international operations), cash management becomes more complex. Cash generated by one entity may be needed by another, requiring intercompany transfers.

Where these transfers are characterised as loans rather than equity contributions, they must be documented at arm's length rates and terms — the same rates that would apply to a third-party lender. This is a transfer pricing requirement under HMRC rules and international tax standards, and failure to document intercompany loans properly can result in interest income or expense being disallowed or recharacterised on tax audit.

A family office or corporate group should maintain a register of all intercompany loans, with signed loan agreements, market-rate interest, and regular repayment schedules. This documentation is the first thing HMRC will request in the event of an enquiry.

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This guide is for general information only and does not constitute financial, tax, or legal advice. Facility terms, interest rates, and regulatory requirements are subject to change. Seek appropriate professional advice before making significant treasury or financing decisions.

How Global Investments Can Help

Global Investments advises SME owners and family offices on corporate treasury structure, banking relationships, and cash management disciplines. We work alongside your accountant and bank manager to design treasury frameworks appropriate for your business size and complexity — from cash flow forecasting tools and notice account structures through to FX hedging strategy and credit facility renegotiation.

For family offices managing multiple entities and currencies, we provide an integrated treasury oversight service that gives principals a consolidated view of cash position, FX exposure, and facility utilisation across the group. Contact our team to discuss how we can support your treasury function.