After covering the fundamentals of DAO incorporation in our previous article, it's time to set the basics of storing funds safely and managing them efficiently to build a resilient DAO that can last through crypto winters.
Next, we will be covering:
- DAO Bookkeeping
-Hiring in DAOs
-Team Structure in DAOs
-KPIs for DAOs
What is Treasury Management and Why Is It Important for any company?
Treasury management refers to planning, organizing, and controlling the holding, funds, and working capital of your entity.
Treasury management gives founders more visibility over their assets which allows them to make better decisions in terms of spending management and investments, especially in a volatile market,
Steps You Can Take to Make The Most Out of Your Funds
Step 1: Use a Multisig
In web3, the first step towards effectively managing your funds is making sure they are stored safely and practicing control in a decentralized environment.
Multi signatures emerged to help teams manage funds collaboratively:
- They’re self-custodial — you don’t rely on a third party to store funds
- They’re secure against social risk - no one person can flush out your company’s funds
- They’re secure against technical risk - you need several private keys which makes them difficult to compromise
- They’re software-based — you can transact anywhere, any time from your browser
- They’re smart-contract based - you can interact with other smart contracts to leverage DeFi access and innovative services
Step 2: Maintain a clean wallet hygiene to keep control of funds and investments
Implementing a process to keep track of your funds, can help founders mitigate a lot of risks related to transacting with cryptocurrencies. Here's what you can do:
- Educate your team members and prevent them from opening wallets on-the-go
- Divide wallets by use case (eg: tech, treasury, etc) and label them
- Keep a directory of wallets with names, addresses, and use cases clearly identified
- Separate personal and professional wallets
- Note every transaction data instantly. Don't forget to categorize it and add an explanatory note
These basic steps will help your operations manager and eventually, your accountant get a better grasp of what a purchae was made for and will give you oversight over your spending.
Step 3: Level Up With Tools Such as Multis for Convenient Approval Workflows and Accountability
We are designing our accounts to have technically sophisticated features (like tracking all company wallets, making labels) as well as to include behavioral nudges that encourage good "wallet hygiene" or best practices for dealing with your company's crypto.
By saving a wallet address as a contact with a name, it means that the outgoing transaction will be more legible. You can also filter the transactions by wallet address, asset and amount. Not only that, you can add an attachment, write a note ( and use emojis 😉 ), and label the transactions. This makes tracking and understanding the multiple transactions to keep your crypto business running easy. In addition, you can benefit from valuable insights about your cashflows, your expenses and the profitability of your portfolio.
Step 4: Save Your Treasury From Shrinking Through Diversification
It's simple: if you are only holding your native token in your portfolio, and for some reason (management, marketing, competition, a bear market), its value goes down by 30%, then the value of your whole treasury will shrink by 30%.
The most impactful DAOs in the space have their treasury diversified. For example, BitDAO keeps 18% of its treasury in USDT and 17.4% in USDC. Decentraland has 38.6% in USDT.
✅ Diversify your treasury into stablecoins to reduce volatility. Here's how:
- OTC sales
- Conditional order strategies
- Financial Derivatives
- Use Diversification Tools
- Swap crypto-to-crypto on Multis to rebalance your portfolio 😉
Treasury management is about security and discipline. It is important to buckle up with the right tool stack and the right mindset. You can leverage Multis to automate your crypto finops and reduce the risk of human error: save time and manage your finances collaboratively.