Cheika was instrumental in bringing the former rugby league international to union as coach of the New South Wales Waratahs and gave Folau the majority of his 73 test caps.
Cheika said in April that he would not be able to select Folau after the fundamentalist Christian posted on social media that hell awaited "homosexuals" and other groups.
Folau, who scored 37 tries for the Wallabies and was one of the team's few world class players, has since had his contract terminated after a code of conduct hearing last month and is fighting the decision in court.
Cheika said at a luncheon at his former club Randwick on Friday that he had a "good relationship" with Folau but the collective had to be bigger than the individual.
"One thing I've learnt here is the team is king," said Cheika.
"The only thing for me is the team has to concentrate on the game.
"Focus has to be on winning the next game, or the World Cup or the Bledisloe Cup or the things that our fans want, the things that we want.
"And once that focus is not there completely, you have to make the sacrifices to make that the number one focus."
Folau's four-year contract was worth a reported A$5 million (£2.7 million) and the 30-year-old has launched legal proceedings against Rugby Australia at a local industrial relations tribunal.
The saga was also a distraction for the Waratahs during the Super Rugby season and a number of the side's senior players criticised Folau for allowing the situation to interfere with the team's focus.
"It's just about the team is the most important thing and anything that can distract a team from achieving its goals, you have to deal with one way or another," said Cheika.
"Not always this way ... it is unfortunate how it ended up but something had to give in that situation."
(Reporting by Ian Ransom; Editing by Peter Rutherford)
