For the longest time, treasury management felt like a term that belonged in the corridors of banks and financial giants. But things have shifted. Today, even a fast-growing company with a few crores of idle cash needs to think like a treasurer.
And the big change? Mutual funds.
Traditionally seen as a tool for individual investors, mutual funds—especially liquid and overnight funds—are now becoming a go-to instrument for businesses too. Whether you’re looking to allocate surplus funds for a few days or several months, mutual funds have evolved beyond just wealth-building tools—they’re now integral to modern treasury strategies.
And as treasury management systems (TMS) evolve, they’re not just tracking balances—they’re allocating idle capital smartly, often directly into mutual fund baskets.
Why Treasury Management needs a Modern Approach
Managing money has always been important. But in today’s fast-moving economy, managing it efficiently—digitally, securely, and strategically—is critical.
Corporate treasuries are no longer passive back-office operations. They’re expected to maximise returns on idle funds, maintain liquidity buffers, and minimise risk—all at once. At the same time, traditional tools like fixed deposits or current accounts offer limited returns and lack flexibility.
This is where mutual funds come in.
Especially in India, liquid and ultra-short duration funds have emerged as effective short-term investment options that offer better yields than traditional deposits—without locking up capital. The ability to earn market-linked returns with same-day or next-day liquidity has changed the game for corporate cash management.
And the real value is unlocked when mutual fund allocations are built directly into the treasury management system—turning what used to be a manual, fragmented process into a seamless digital flow.
What is Treasury Management and Cash Management?
Before we explore how mutual funds fit in, let’s understand the basics.
What is Treasury Management?
Treasury management refers to the processes and tools that help an organisation manage its liquidity, investments, and financial risk. It includes cash flow forecasting, funding strategy, investment decisions, and managing financial exposure—all while maintaining regulatory compliance.
What is Cash Management?
Cash management is a subset of treasury—it deals with how companies collect, handle, and utilise cash on a day-to-day basis. This includes everything from ensuring there’s enough liquidity to pay salaries to deciding where to park a temporary surplus.
Traditionally, treasury and cash management were manual or spreadsheet-driven.
But with the rise of treasury management systems, companies now automate these functions—sometimes even integrating mutual fund platforms directly into their dashboards.
In this modern setup, mutual funds become one of the key levers—used not only for wealth management but also for strategic cash deployment.
How Mutual Funds fit into Treasury Management Systems
Today’s TMS platforms aren’t just about monitoring balances or reconciling payments. They’re about making smart decisions automatically.
That includes:
- Setting rules to invest surplus cash in liquid or overnight mutual funds
- Tracking real-time NAVs and returns
- Executing redemptions in time to meet upcoming liabilities
- Rebalancing portfolios for optimal yield vs risk
So, where mutual funds were once handled outside the treasury process—via bank logins or broker apps—they are now integrated directly into the treasury function.
This evolution is especially relevant for companies that deal with variable cash flows or seasonal spikes in revenue. Rather than letting money sit idle, mutual funds allow treasurers to put capital to work, without compromising liquidity.
In other words, the TMS becomes your intelligent assistant—allocating idle funds into the right mutual fund schemes, with oversight and control.
Treasury Management functions: Where Mutual Funds fit
Let’s look at how mutual funds align with the core functions of treasury management.
1. Liquidity Planning
Treasury teams must ensure that funds are available when needed—but also not lying idle. Mutual funds like overnight and liquid funds offer T+0 or T+1 redemption, meaning you get your money back the same day or next day. This aligns perfectly with short-term planning.
2. Investment Strategy
Instead of locking capital in fixed deposits, businesses can use ultra-short duration funds or money market funds to earn better yields while retaining flexibility. These funds are market-linked but low-risk, making them ideal for parking surplus.
3. Risk Management
Mutual funds are regulated by SEBI, which ensures safety, transparency, and strong compliance norms. Diversification across securities also reduces credit risk, especially in high-rated debt funds.
4. Reporting & Audit Readiness
Many TMS platforms now offer direct integration with fund platforms or APIs from AMCs, making reporting and audit trails simpler. Transactions are tracked, categorised, and aligned with compliance needs.
5. Forecasting & Automation
Some advanced treasury platforms allow predictive investment—allocating funds based on forecasts and cash flow models. For example, if a TMS forecasts ₹2 crore will lie idle for 10 days, it can auto-allocate it to a low-risk fund and redeem in time.
These functions together make mutual funds not just a passive investment, but a dynamic treasury tool.
Why Mutual Funds are a smart addition to Treasury Portfolios
Integrating mutual funds into treasury management systems isn’t just about chasing higher yields—it reflects a deeper shift in how modern organisations think about liquidity, idle capital, and cash management.
Traditionally, corporate treasury meaning revolved around ensuring liquidity, managing currency risks, and maintaining banking relationships. But as treasury management functions evolve in the digital age, there’s a growing focus on strategic deployment of funds.
In this context, mutual funds offer a practical, regulated, and flexible alternative to conventional instruments.
1. Higher Returns on Idle Cash
Idle money sitting in current accounts yields close to nothing. Instead, by parking surplus funds in mutual funds—especially liquid or overnight schemes—companies can tap into market-linked returns. These returns often outperform savings and short fixed deposits, especially when tax efficiency is considered.
2. Built-In Liquidity with Minimal Lock-In
Liquidity is the heart of cash management. Mutual funds like overnight or liquid funds offer redemptions on a T+0 or T+1 basis, making them ideal for treasury needs. This ensures that capital is never far from reach—addressing what is cash management in its most operational sense.
3. Real-Time Flexibility and Customisation
Treasury managers can diversify surplus cash across funds based on their yield appetite and duration requirements. Whether for 7 days, 30 days, or 90 days, mutual funds allow precision in managing both return and liquidity.
4. Regulated and Transparent Framework
When it comes to compliance, safety, and audit trails, mutual funds shine. Governed by SEBI, they come with detailed disclosures, credit risk assessment, and built-in diversification. This addresses core treasury management in banking concerns, especially around capital safety.
5. Alignment with Modern Treasury Management Systems
Modern TMS platforms are no longer passive dashboards. They offer intelligent automation—allocating funds, tracking NAVs, and rebalancing investments based on real-time cash flows. In such systems, mutual funds act as a native asset class, not an external afterthought.
By leveraging mutual funds, treasury managers align their approach with broader goals: ensuring liquidity, optimising returns, and maintaining governance.
In doing so, they redefine what treasury management means in the post-digital era—not just managing money, but maximising its potential through smart, integrated systems.
How to Choose the Right Treasury Management System for Mutual Fund Integration
Choosing the right TMS can make or break your treasury efficiency—especially if you’re integrating mutual funds.
Here’s what to look for:
1. Mutual Fund Integration Support
Check if the system allows API connections or dashboard-based execution for mutual fund transactions. Some platforms partner directly with AMCs or MF distributors.
2. Real-Time Cash Flow Visibility
The system should forecast surplus cash and suggest deployable amounts, helping you avoid under-investing or overdrawing.
3. Customisable Investment Rules
Ensure the platform allows you to define rules: for example, “invest if idle cash exceeds ₹50 lakh for more than 2 days.”
4. Compliance & Audit Tracking
Look for features like audit trails, transaction history, and reports aligned with internal finance policies.
5. Scalability
As your organisation grows, the system should support larger transaction volumes and complex fund combinations.
Choosing the right platform ensures that mutual funds aren’t just accessible—they’re actionable, directly from your treasury workflow.
Conclusion
Treasury management has evolved from spreadsheets and static dashboards to intelligent systems that act, not just observe. And mutual funds have moved from individual portfolios into the corporate treasury toolkit—offering a compliant, flexible, and yield-enhancing solution.
By integrating mutual funds into your treasury management system, you’re not just investing better—you’re managing smarter.
And incorporating a treasury management system into this process empowers you to make confident, data-driven decisions around short-term fund deployment.
However, always seek professional advice before deciding the best strategy for your organisation. Hyperbola is an AMFI-registered Mutual Fund Distributor, assisting investors in making risk profile–based decisions.
Sign up on Hyperbola to manage your private limited company’s treasury seamlessly.
FAQs
1. What is the difference between treasury management and cash management?
Treasury management covers the broader scope of financial planning, liquidity, and risk, while cash management focuses specifically on the inflow and outflow of cash for daily operations. Both are essential, and mutual funds can enhance both functions when integrated correctly.
2. Can mutual funds be used for corporate treasury operations?
Yes. Mutual funds, especially overnight, liquid, and ultra-short funds, are now widely used by corporations to manage short-term surplus cash with better yields and sufficient liquidity.
3. Are liquid mutual funds safe for businesses?
Liquid funds are considered relatively low-risk and are regulated by SEBI. They invest in high-rated short-term instruments, making them suitable for businesses needing quick access and capital safety.
4. What is a treasury management system and how does it work with mutual funds?
A treasury management system is software that helps organisations manage cash, liquidity, investments, and risk. When integrated with mutual fund platforms, it allows automatic or rule-based investments, redemptions, and real-time fund tracking.