The Benefits of Holistic Treasury Management

With a high-level view of a company’s finances, treasurers can help the C-suite meet strategic objectives by taking a more holistic view of the company’s financial risks and potential rewards.

One way treasurers can enable this process is to regularly connect with other departments to discuss their needs and gain an understanding of their pain points. Though they will not be able to solve all of the issues they encounter, obtaining a bird’s-eye view of the company’s finances can be useful when other departments are considering a change in strategy.

When consulting firm McKinsey surveyed treasurers at global companies, for example, it found that the average number of company bank accounts was greater than 850—substantially more than the 200 accounts found at the best-performing companies. By taking a holistic view of the company’s far-flung finances, the number of accounts could be reduced and the capital better utilized.

When a company’s procurement team struggles to get its large purchases approved in a timely manner, a holistic treasury approach could discover that approvals are often bogged down because managers are waiting for the accountants to release a weekly financial report. Treasury may be able to find a solution to this issue by granting procurement managers access to real-time financial data or creating an on-demand report that the team can request whenever they need to approve a large purchase.

As this illustrates, by communicating with other departments on a regular basis, corporate treasurers often can devise unique solutions that other departments would not have found on their own.

Providing Feedback

Although all departments in the organization are supposed to be working toward the same goal, each department has its own milestones to reach. By providing other departments with financial feedback tailored to their needs, treasurers can help them achieve those results.

For example, corporate treasurers can build cash forecasting models specific to each department. These models could show departments not only if, but also when, they have excess cash. This encourages departments to either use their cash more efficiently or help the company earn interest by transferring funds elsewhere when cash sits idle.

Assessing Risk

Treasury may also be able to build individualized risk profiles for other departments in the company. All departments are exposed to a unique set of financial risks—markets, currencies, interest rates, and the cost of credit are always changing, as are department needs.

Understanding the risks is an essential task before a department can attempt to mitigate them. For example, if a specific department is consistently maxing out the company’s credit lines, treasurers can assess the risks of expanding their line of credit. Or, if a department operates using more than one currency, treasury can determine which currency to prioritize.

Identifying Worthwhile Financial KPIs

Corporate treasurers know how important key performance indicators (KPIs) can be, but not all departments do. Treasurers can put their expertise to use by helping other departments refine their KPIs, which are targets they need to reach. With the right KPIs in place, departments will have a realistic milestone to shoot for, which can both encourage progress and help them develop detailed plans to reach their goals.

The McKinsey survey of treasurers showed that half believed that their cash forecasting was less than 80% accurate.

Although KPIs don’t always need to be financial in nature, many of them are. Because treasurers have a deep familiarity with the financials, they can help other departments create worthwhile and useful KPIs.

Harnessing Technology

New technologies within the treasury department can support growth inside and outside the treasury department. These financial technologies can improve cash management and boost reporting accuracy, but they can also help the company gain credibility as an innovative leader in the industry, which is a benefit that is hard to quantify.

Corporate treasurers should—at minimum—try to gain insight into the latest technological developments. They can do this by chatting with other corporate treasurers and attending presentations about emerging technologies. But corporate treasurers can also be involved in the development of new financial technologies. With board support and collaborations with R&D teams or chief technology officers, they can find a developer that builds solutions catered to their company’s needs.

Being Open to Change

Collaboration requires the treasury to be open to change. If a department leader has a strategic plan that requires buy-in from treasury to get up and running, treasury should be open to making those changes. They have a view into the company’s financial inner workings that other departments lack. Together, they can build something new that will foster innovative change not just for the department, but for the business as a whole.

To learn more about this and other treasury tools, contact your relationship manager or treasury management officer—or find a banker.