80/20 Rule: Simple Power for Better Treasury Management

Ever feel like your treasury desk is drowning in spreadsheets, endless approvals, and tiny tasks that never end? The 80/20 rule, also known as the Pareto Principle, says roughly 80% of results come from 20% of effort. In finance, that means a handful of activities drive most of your cash‑flow health, risk reduction, and profitability. Spotting those key actions can free up time, lower costs, and give you room to think strategically.

First off, don’t treat the rule like a magic formula that guarantees results. It’s a lens – a way to ask, ‘Which few things are truly moving the needle?’ By constantly asking that question, you start trimming the noise and focusing on high‑impact moves that matter to senior management and the board.

Why the 80/20 Rule Works in Finance

Money flows aren’t evenly spread. A few large customers, a couple of major currency exposures, or a single supplier contract often dominate a company’s balance sheet. When you map cash‑in and cash‑out sources, you’ll see that a tiny slice of transactions creates the bulk of risk and opportunity. That’s where the 80/20 rule shines – it tells you to zoom in on the big players.

For example, in many UK corporates, the top five customers make up more than 70% of revenue. Managing those relationships well—through credit terms, hedging, or early‑payment incentives—delivers a disproportionate boost to working capital. Likewise, a single high‑yield bond or a major foreign exchange position can account for most of your market risk. By concentrating hedging resources on those few exposures, you avoid over‑hedging and keep costs low.

Applying the 80/20 Rule to Your Daily Treasury Tasks

Start with a quick data dump. Pull the last six months of cash‑flow statements, supplier invoices, and FX trades. Rank each line item by absolute value and highlight the top 20% that represent roughly 80% of totals. Those are your priority buckets.

Next, ask three questions for each bucket:

• Can I negotiate better terms or rates?
• Is there a way to automate the process?
• What is the hidden cost if I ignore it?

If the answer is “yes” to any, you’ve found a quick win. For instance, if one supplier accounts for 30% of payables, a small discount for early payment can shave millions off your cost of goods. If a single FX forward covers half of your overseas sales, consolidating that hedge into a longer‑dated instrument could lower transaction fees.

Don’t forget to track the impact. Set up a simple KPI dashboard that shows the contribution of your top‑20% items to overall cash‑flow variance, risk exposure, and cost of capital. Review it monthly and adjust the list as markets shift. The goal is a living list, not a one‑off spreadsheet.

Finally, delegate the remaining 80% of low‑impact items. Use RPA bots for routine reconciliations, outsource standard payments, or give junior analysts ownership of the small‑ticket chores. That frees senior treasury staff to focus on strategic initiatives like liquidity planning, funding diversification, or ESG‑linked financing.

By consistently applying the 80/20 rule, you turn a chaotic treasury function into a lean, high‑impact engine. The biggest gains come from recognizing that not all tasks are equal, then putting your best people and resources on the few that truly move the needle. Give it a try next month and watch your cash‑flow picture sharpen, your risk profile flatten, and your team’s workload drop.