According to a new survey of CFOs, treasurers need to offer more accurate information and be more in touch with the rest of the business if they are to become more strategic. Harsh criticism, or recognition of the need for more resources?

Most CFOs see room for improvement in the treasury function, according to a new survey and report, “Three Key Areas Where CFOs Say Treasurers Need to be More Strategic”.

With 45% of CFO respondents currently considering their treasury operations to be only ‘average’, a ‘best in class’ vote was offered by just 8%.

The CFO Research Services survey, conducted in partnership with technology firm, Kyriba, canvassed the views of more than 150 senior financial executives drawn from a wide variety of industries. The results may seem like a slap in the face for all the hard work put in by treasurers but the paper is at pains to point out that it is recognition that “many treasury functions face organisational and technological impediments that are preventing them from delivering the highest value”.

Concerns

“One challenge for treasurers is that a large part of their activities and focus are transaction oriented, and so the CFO may not feel like they are getting a lot of strategic insight from treasury,” says Eric Ball, General Partner of Impact Venture Capital and a former CFO who served as a SVP Treasurer at Oracle for ten years. What Ball sees is the need for “better data visualisation and reporting of key treasury metrics”. This will help CFOs “better understand the value of treasury”.

Indeed, a recent EY report on treasury management systems showed “finding the right response to the right questions on the treasurer’s and CFO’s agenda can make the difference between a thriving company with a solid credit rating and an organisation struggling with liquidity and credit downgrades”.

Finding a way to deliver “the right response” is a challenge, the CFO survey acknowledges. The top three difficulties, cited by around 25% all respondents, were: the complexity of their organisation’s financial structure; inadequate technology for conducting effective analysis; and no standardised approach to working capital management.

Treasurers still relying on spreadsheets face version control issues and a “broad susceptibility to errors associated with manual data entry”. That said, 60% of respondents reported that their organisations currently use a dedicated treasury management system (TMS).

CFOs have a clear view on where their treasurers need to be more strategically minded and do a much better job of supporting business objectives: risk management (43%), cash management (40%), and working capital management (35%). Concern was also cited around treasury’s handling of payments fraud (30%), payments controls (26%), FX gains/losses (20%), and investor expectations such as for cash repatriation (26%).

On the theme of working capital management, for example, in 2018, the US Working Capital Survey by the Hackett Group found that although the top 1,000 US companies ended 2017 with a stronger working capital position than they had at the start of the year, they still “left more than US$1tn (in working capital) on the table and ignored a proven opportunity to increase profits by as much as 20%”. On cash management, 17% of CFO survey respondents said their treasury organisations are not able to satisfactorily provide cash visibility forecasts, risk exposure data, or insights related to global compliance.

Remedy

With 2019 just around the corner, the kind of variables treasurers will be wrestling with are likely to include higher oil prices, new trade tariffs, rising interest rates, and yet more political uncertainty. CFOs see two key ways for treasurers to help their organisations through the uncertainty. One is by embracing technology, and the other by building a better rapport with the CFO.

Around 33% of respondents want to see treasurers substantially improve the technology solutions their respective organisations are using to match industry best practices around cash management. About 25% saw more use of technology for the other core themes of risk and working capital management.

To develop a better working relationship between the CFO and treasury, 43% of respondents said there was a need to improve transparency and communications between the functions. This means more face-to-face meetings, but many also said that the treasurer needs to be doing a better job of communicating with the CFO, offering timely insights on critical areas.

The survey suggests that more automation may be the answer, quoting one respondent who urges treasurers to embrace “more automation that raises red flags when necessary,” and another who advises that treasurers “have all their data analysis reports right”, before giving it to the CFO.

Rather than being an attack on the skill of the treasury function, the report’s conclusion is that CFOs want treasurers to help prevent issues, quickly identify and solve them when they do arise, and be a part of the organisation’s accelerated growth.

What do you think? A thinly veiled insult to treasury or a CFO-sanctioned business case for more and better resources? Let us know your experiences of working with CFOs.