You can’t build a great company by having a great treasury – but it’s possible to destroy a company with a bad treasury. Panellists at Money20/20 discuss the role of treasury in supporting companies in growth mode.
At global payments solution provider PaySafe, the importance of the company’s treasury function working in lockstep with the wider business became apparent when the group was in the process of buying a new building. Speaking to delegates at Money 20/20 in Amsterdam, Steve Delpy, Chief Banking Officer at the PaySafe Group said the purchase was suddenly put in jeopardy because of a scarcity of liquidity in the company. “The business was profitable, and we had the cash, but there was a disconnect between the activities of the company and the business function.”
In another story from the frontline, fellow panellist Jody Perla, Managing Director, Global Banking and Payment Infrastructure at financial solutions and payments group Payoneer, said the importance of the company’s treasury and finance teams working together in the decision-making process was underscored when Russia invaded Ukraine. The company had to work quickly to ensure its Ukrainian customers could still run their businesses during the war, making sure funds were available. In many ways war in Ukraine shifted the role of treasury at Payoneer from outlier to playing a central role in building a scalable platform for the future, she said.
Companies in growth mode, adding new customers and introducing new product lines, often don’t have a well-defined treasury function. But there’s an inflection point, after which the most sustainable way to grow a business comes via a vibrant treasury, said fellow panellist Priyanka Rath, Managing Director at J.P. Morgan, who advises corporates on how to bring treasury into their core business function.
The cost of doing business has grown more expensive, raising questions around how to fund products and ensure the best value; a treasury can make strategic decisions that support growth and bring sponsorship from the top, she continued. Treasury needs to come out of the back office into the open, speak the same language as the rest of the business, and develop a proud swagger.
“Much of the role requires people understanding what treasury actually does,” Rath explained. “It’s not just a department that says no or called upon when people want cash. More companies are bringing their treasury function to the forefront as an active voice influencing business decisions, a far cry from the retro back office they used to be. We are seeing more companies champion treasury, and this is a welcome change – where treasury is at the forefront of driving transformation from within.”
A common disconnect is found between the sales and business development functions. For example, sales teams increasingly come up against prefunding and liquidity challenges. Treasury must be part of this conversation, said Delpy. “There are ways to bring funding and liquidity to a deal and often the sales team is unaware of treasury’s knowledge. It’s about turning treasury from back-office into being a business enabler.”
The current macro environment should also encourage treasury to come to the fore. Higher interest rates are a chance for treasury to support a business generate returns, reduce debt and support capital management. In an environment of reduced liquidity, controlling cash is paramount. Moreover, panellists said treasury quickly pays for itself. For example, a company without a treasury function relies on banks and incurs charges for handling its cash. “Treasury is a function that pays for itself,” said Delpy.
An integrated treasury function can also support companies around compliance and risk. “Very few people have a holistic view of the cost of running a business,” said Perla. But treasury can help tie together the cross-border component around payments and opening bank accounts with the regulatory environment. Treasury can guide a company strategically, advise if it should work with its existing bank or a new bank; where there are economies of scale and how to execute successfully.
Panellists discussed the role of treasury in acting as a business enabler rather than simply a control function. Making treasury relevant to the rest of the organisation is crucial and ensuring treasury can deliver by increasing margins. Treasury should ensure the rest of the business knows and understands what it does, get rid of financial jargon and use the right language to make it simpler for people to partner with treasury and enable teams to complete deals. “Treasury needs a swagger. I can make strategic decisions,” concluded Rath.
