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5 Tools for Change: Identifying Treasury Transformation Opportunities

A proactive treasury strategy can help your organization achieve an efficient and scalable operation that contributes to the broader success of the enterprise today and in the future.

In today’s complex, technology-driven business landscape, treasuries are being challenged to apply the latest technology, innovation and market insights to transform their organization. However, it can be challenging to identify where these new tools and ideas can and should be applied—particularly in the face of limited resources.

The first article of this series looked at how treasury organizations can identify opportunities to change their structure and processes based on key objectives such as visibility, efficiency and control. Once the decision to initiate change has been made, the next step is a deeper dive to identify where these opportunities exist and the potential impact of that change on the organization. Ultimately, you want to come out of this with a clear list of areas to address across treasury, accounts payable (A/P), accounts receivable (A/R) and other related cash functions.


Five Tools for Change

Here are five tools you can employ internally to help comprehensively assess your organization and identify opportunities for improvement.

  1. Audits. The growing capabilities of automated technology are creating new opportunities for efficiency. To identify these areas of improvement, treasurers should conduct annual audits of people, processes and technology. These audits should be geared to look for steps that can be streamlined, data or information that can be enhanced and functions that can be outsourced or centralized. The underlying philosophy here is that your people should be spending more of their time on analytical or exception-type functions—not on manual or repetitive steps that can be programmatically addressed. A common example is centralizing A/R or A/P functions from field or remote offices into a shared services solution; this helps realize economies of scale, mitigate risk and improve working capital metrics by standardizing processes and leveraging scalable technology.

  2. Another aspect of the audit should include bank relationships and account structures, seeking opportunities to balance wallet share of operating relationship banks and lead credit providers while managing an efficient account structure that optimizes liquidity.

    Finally, treasurers should assess the fees for services from banking providers, vendors or other third-party partners. Over time, it’s possible for redundant services and platforms to be implemented, or for such services to no longer be necessary due to new tools made available in the market. Evaluating the organization’s current services relative to its actual needs can help identify quick-win opportunities that can streamline and simplify your treasury infrastructure.

  3. Benchmarking. One method for measuring progress over time is to compare treasury functions with those of other organizations. Treasury organizations should examine available external metrics and market best practices to benchmark their functions. Common metrics available through public sources can include working capital metrics (DSO, DPO) and various cash flow and cash level ratios. This gives a treasury organization another method to gauge whether performance is lagging or leading, and it helps reveal blind spots and gaps requiring action and improvement.

  4. Policy and procedures review. When managing across different lines of business or even remote offices, establishing standard processes and policies for everyone to adhere to is a critical building block of a viable control framework. To this end, treasury organizations should review disjointed policies and procedures, staff responsibilities and segregation of duties—both in writing and in application. The review should cover how risk tolerance and the control framework are in step with the corporate strategy and market environment.

  5. Treasury policies and procedures should be tested as part of this assessment, though organizations rarely perform these tests. An effective strategy should include treasury governance that has not only been reviewed, but also stress tested to establish operational readiness for unforeseeable headwinds.

  6. Future growth strategy. A treasury organization is an essential stakeholder in the growth strategy of the company. It falls on treasury to put in place scalable structures and tools that can accommodate both organic and inorganic (i.e., mergers and acquisitions) growth. However, treasury is often included or informed late in the process, which can increase risk exposure, limit its ability to advocate for new tools or partners to support the plan, and frustrate the overall effort as treasury tries to catch up with the front-end business. Particular to organizations with considerable M&A activity in the works, informing treasury in advance will allow it to develop tools such as an M&A integration playbook to help facilitate efforts going forward.

  7. Technology gap analysis. There are several technological tools that can advance and improve a treasury organization’s capacity to support the enterprise strategy. A technology gap analysis is a broad review of current technology relative to current and future treasury responsibilities, in order to help determine how the existing architecture can support these responsibilities. The analysis allows treasury to identify key problem areas in the existing infrastructure and focus its surveying efforts on technology that can truly support its needs. Areas to review include portals and platforms leveraged for information reporting and analytics; workflows and enterprise solutions that interface with partners; and connectivity shared with partners, including banks and other third parties with whom files and data are exchanged.

  8. For example, many treasurers want a single global dashboard represented visually, with automated efficiency to obtain global bank account and liquidity reporting across all banking partners. Performing this exercise should help reveal what capabilities exist internally today to support that, and identify where investment needs to be made to accomplish this objective.


Opportunities Have Been Identified . . . What’s Next?

Following this internal review, it’s time to look for partners and solutions that will help treasury address the needs and gaps it has identified. Internally, you should engage impacted teams within the finance organization, tax, legal and information technology to help determine and prioritize which opportunities stand to deliver the greatest short- and long-term impact across the business. Additionally, getting senior sponsorship to provide the management support for this effort will be critical in ensuring continued engagement across the teams.

You should also engage your relationship banks, technology vendors and other third-party resources available to help you formulate your plan going forward. These resources can provide leading practices gleaned from other corporations, share new-to-market solutions and considerations, and offer implementation and support insights that will inform your prioritization exercise and roadmap. The next installment of this series will explore how treasury can leverage external parties to learn about and apply new technology solutions in order to realize their objectives.

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