In other organisations, van Tol says a more integrated approach may be adopted. “Specific treasury knowledge and competences are required to get a better view of the broader finance function,” he says. “In these organisations, we see that there are job rotation schemes in place where treasury specialists transition into business roles, and finance/business managers take treasury roles.” He adds that in corporations where treasury is part of the finance function’s job rotation program or management development programme, “we tend to see a better fit between treasury and business.”
Technology and integration
Aside from soft skills and human resources considerations, the treasury’s integration with the rest of the business also has a technology component. Van Tol noes that treasurers are used to working with a “relatively high number of different specialised technology solutions”, including treasury management systems, electronic dealing platforms, payment systems and bank connectivity solutions, as well as best of breed applications for areas such as cash flow forecasting, hedge accounting and risk management. However, as van Tol points out, “many of these applications are very focused on the key treasury function, and the interface to the broader finance function is often the weakest link.”
Consequently, he argues it would be beneficial for treasury’s integration with the business if this link was strengthened by a better interface between different applications. “A good example of full integration from a technology perspective are those companies who have implemented a data warehouse/data lake, which is used as the single source of truth for both treasury and the business,” he says.
That said, van Tol notes, “From an IT function’s perspective, we sometimes still come across this treasury vs the rest of the business mentality.” He adds that this is due to the very specific functional (and sometimes also technical and security) requirements defined by treasury. “For IT departments, the treasury function is a very specific and demanding internal client,” he says. “They use many different systems and have a limited number of users.”
Polykrati says that as well as working more closely with areas like procurement and sales, the company’s treasury is also more integrated with IT, not least due to the rising threat posed by cybercrime. “They are always afraid of a breach made via phishing mails – which have significantly increased during recent years – so we work closely with IT, exchanging news and real cases to improve the group’s awareness,” she explains. That said, there is still room for improvement – and in the future, Polykrati says she hopes to adopt a treasury management system so the treasury can have a more automated system in place.
Managing and forecasting cash flows
Cash forecasting is one area where close collaboration with the rest of the business is particularly important. In order to forecast effectively, treasurers will typically need to obtain information from a variety of sources, such as AP and local business units. However, this may be less than smooth if the people expected to provide information lack a clear understanding of what is needed or why the forecast is important.
Effective communication with the relevant departments is essential if treasurers are to obtain accurate information and therefore build an accurate forecast. Technology also has a role to play in streamlining this process. Nick Armstrong, CEO of Identitii, says that improvements to straight-through processing (STP) and additional functionalities arising from new and existing technologies, mean that “treasurers are able to better forecast cash positions and therefore better support other parts of the business as they play their roles.”
George Dessing, Executive Vice President Treasury & Risk at Wolters Kluwer, likewise notes that cash flow management is a complex process – “and increasingly so within the dynamic and continuously changing international environment that we deal with at Wolters Kluwer.” He says that implementing one of the company’s products, CCH Tagetik, “will help us to receive information from our businesses in a more structured and efficient way”, with automated updates and a central repository showing the impact of business changes on the company’s cash flow plans.
That’s not to say that the integration between treasury and the rest of the business is invariably seamless. For example, Michael Bosacco, Treasury Advisory Executive in Global Transaction Services at Bank of America Merrill Lynch, says that treasury has always been well integrated with certain disciplines, such as tax, legal accounting and, more recently, technology. He notes that these teams “all have logical dependencies and typically are united in their efforts to ensure a company’s capital and operations are optimized and the overarching strategy is successfully executed.”
However, Bosacco also notes that beyond these core corporate disciplines, it is “uncommon” to find treasury deeply rooted within the business units it supports. “As a result, there’s a tendency for blind spots to exist,” he says.
What do these blind spots look like in practice? Bosacco explains that in most companies the corporate functions report into the CFO, whereas business unit presidents report to the COO (if one exists) or the CEO, alongside the CFO. “This structure breeds treasury (or other corporate function) blind spots, since the CFO typically cannot effectively faceoff operationally from a treasury standpoint to offer integration opportunities between the businesses and treasury,” says Bosacco. “For example, if a company has three major business units, each unit will not have its own treasury function, but the units will have a dedicated finance team.”
Where integration is concerned, Bosacco says blind spots can arise both because business unit finance considers treasury to be the group that takes all the cash, and because treasury considers the business unit finance to be the group that makes decisions on how/when to collect from customers and pay vendors.
“Needless to say, the two (cash and receive/pay) converge when considering basic balance sheet management,” says Bosacco. “While CFOs and business unit presidents know this, they are rarely familiar with the operational requirements, products or services that can create the convergence” – a situation that Bosacco identifies as another blind spot. “This exists because the silo of corporate functions continues to run alongside the silo of business functions, and so integration fails,” he adds.
Eliminating blind spots with technology
Bosacco says that technology “helps break barriers by improving the visibility and awareness of data and workflows across the business and enterprise-wide, breeding openness”, noting that this is the opposite of a blind spot. He adds that “tech savvy treasuries” are beginning to use digital tools to achieve a number of goals:
According to Bosacco, digital adoption – in other words, consuming data and employing technology to support near-time decision making – “provides a reusable pathway for Treasury to connect with the rest of the business. For example, business analysis generated from technology tools used to unlock data from across the enterprise can serve as the foundation to support strategic insights for both the business and company-wide.”
Bringing it all together
In conclusion, there’s much to be gained by building closer connections between treasury and the rest of the business – and there are many ways in which companies can achieve this. Key to this is approaching the task with the right mindset. As van Tol comments, “If treasury sees the relationship with business only as a mere principal-agent relationship, no real value is unlocked and there is not integration. The relationship should be more seen as equal business partners in which both partners (treasury and business) can benefit from the integration.”