Cash Management Tops Treasury Agendas for 2015
Treasury centralisation has become a priority, as evidenced in Figure 1 below.
Figure 1: Top Priorities for Swedish CFOs and Treasurers in 2015
Typically, multinational corporations will have a group treasury role to oversee international operations. However many have also had functions – such as payables, receivables, risk and forecasting – managed in subsidiary business units by local treasury teams, procurement, finance or supply chain staff.
While a decentralised model may be very effective for some companies and business models, several key factors are driving centralisation, including:
Operating in multiple countries increases the number of company accounts, currencies used, customers and suppliers, which in turn creates complexity, exacerbates fragmentation and decreases transparency. Through treasury centralisation, companies hope to gain better overview of their cash and liquidity positions.
The treasury, like every enterprise function, is expected to identify ways to save costs – in the case of the treasury through reducing the costs of bank interest or inefficiencies in working capital. Centralisation can drive technology consolidation, with multiple systems replaced by a single treasury technology platform or at least more integrated solutions. It can also simplify bank relationships, reducing bank charges and lowering the cost of managing bank relationships. Compliance costs can also be lowered through greater consis-tency of controls across treasury processes.
Technology innovations – such as mobile, cash pooling, web platforms and straight through processing (STP) – improve a centralised treasury’s ability to handle large volumes of activity across the business. These technologies can also drive down treasury’s workload, creating opportunities to provide further business value.
Treasury Taking a Strategic Role
Centralisation gives treasury a complete view of the business and its financial position, while reducing the administrative burden by automating processes. Big data analysis provides it with a complete view of business, providing insight into key metrics such as risks or bank fees.
This puts treasury in a position to collaborate with other departments, providing meaningful insight and analysis that improve companies’ overall financial performance.
This is supported in the results of Nordea’s finance survey of large corporate treasuries at Swedish firms. The CFOs and group treasurers we spoke to confirmed treasury’s growing influence.
Figure 2: Treasury’s Growing Role in Nordic Companies
To support this change in role – and to meet internal support requirements, while keeping risks and costs low – treasurers require faster, better and more integrated access to data.
A Journey, not a Destination
Given the scale of change needed – to people, process and technology – it’s unsurprising that many organisations take a phased approach to centralisation. Tackling liquidity first, as re-flected in the finance priority survey, ensures that the business is better placed to react to opportunities or threats. Increasing payment efficiency, while useful, is necessarily less busi-ness critical.
Engineering consultancy Ramboll
embarked on a phased transition for its centralisation programme. A series of acquisitions had helped the Danish company grow, giving its operations in 22 countries – along with 140 bank accounts, and transactions in multiple currencies. Its treasury centralisation effortscentred on liquidity and cash flow, as well as instituting an internal bank, to give it a single view of its business.
Ramboll uses Nordea’s Global Cash Pool service to give it instant visibility into liquidity across the entire organisation, and increased the reliability of its three-month cash flow forecasting. However, for cultural reasons it left individual business unit teams with signifi-cant responsibilities.
Firms embarking on a treasury centralisation strategy can smooth the process by under-standing what timescales are realistic, where bottlenecks might occur and the migration process for new solutions. Our view is you can best do this through talking to those that have already been through the process and we’re happy to share our experience and even broker these mentoring relationships directly.