If Cash Is King, Treasury Is The Most Important Part Of Finance..., Right?

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We're constantly told that "cash is king". It's one of the most widely-repeated truisms of business, and with good reason: without readily available cash, even profitable businesses can suffer catastrophe.

The importance of liquid assets has been underscored by the COVID pandemic, with businesses of every size making Herculean efforts to meet payroll, pay suppliers, and (if they're lucky and well-positioned) seize the opportunities for post-COVID growth that are becoming apparent in many industries and verticals.

Where does Treasury fit in?

Treasury is synonymous with cash. The role and purpose of the Treasury Function within an organization are to manage cash and to ensure that there is enough of it on hand so that the organization can meet its obligations.

This is an absolutely crucial activity for any business - indeed, perhaps the most immediately important day-to-day priority. So surely Treasury is the most important part of the Finance Function?

Well, in most businesses, this doesn't seem to be the case. Rather, Treasury is often a very small, specialist corporate function that rarely interacts with other parts of the organization. It tends to be treated as part of the machinery of business - something that is expected to 'just work', allowing the other functions to operate smoothly.

This represents a huge missed opportunity. As the pandemic has demonstrated in businesses around the world, the role of the treasury function is naturally elevated in times of crisis, when there is a laser focus on the cash position. But Treasury has a more substantial role to play in almost every business, not only when a crisis hits but at every stage. It can help businesses protect themselves, identify and manage risk, and prepare themselves for growth.

So how can we elevate the role of Treasury, in good times and in bad?

Getting value from Treasury

The treatment of Treasury within most businesses mirrors how the Finance Function more generally has been traditionally viewed. It is seen as a cost center - an overhead to be minimized, and often one of the first budgets to be cut.

But Treasury, along with the Finance Function at large, can be transformed from a cost center to a profit driver. With some simple steps, every organization can get more from Treasury, and turn it into a value creator.

Build better reporting systems: In periods of crisis, CFOs turn to Treasury for vital information. They will want detailed and daily reports on the cash position, cash balances, and availability within individual credit lines. When times are tough, these reports are crucial - without them, businesses are flying blind. But comprehensive and useful reporting has a valuable role to play even when the going is good. By consulting with other functions within the business and by building sensible and well-honed reporting practices, Treasury can ensure that every part of the organization has full visibility of its vital signs, enabling leaders to properly position themselves whether they are bracing for a downturn or preparing for expansion.

Expand Treasury's remit: Reporting is, however, only part of the battle. In addition to providing information and conducting the nuts and bolts work of cash management, Treasury's remit should be expanded and Treasurers offered a 'seat at the table' amongst senior leadership. It's important to tackle the siloing of Treasury, just as it is important to generally tackle the Finance Function's siloing. They both work best and drive the most value when fully integrated within the business. Think of Finance, and Treasury, as an interdisciplinary function - one that should have a presence across every part of the business. For more on the changing nature of the Finance Function and its expanding remit, you can also read my series on Finance Function 4.0.

Be strategic by nature: To unlock Treasury's potential, there needs to be a shift in mindset amongst both Treasury professionals and leaders across other functions. The modern Treasurer should be able to take a bird's-eye view of the business and of the market in which it operates, understanding that their work has important strategic implications beyond simply making payroll. As Finance professionals, we need to equip ourselves with knowledge about business management and strategy and regularly 'zoom out' from the pure numbers and take a holistic view of the business. And, crucially, we need to be able to make a compelling case to other functions when we see risks or opportunities arise.

Embrace digital transformation: Digital transformation is the key that unlocks Treasury's potential. Automation, machine learning, and other associated technologies are now being used to reduce the burden of traditional Treasury work. Indeed, many technical accounting tasks can now be completed entirely by machines. As Finance and Treasury professionals, we must seize this opportunity to move up the value chain. By embracing digital transformation we can free up our time to create value with work that only humans can do: strategy, relationship building, and creative thinking.

So what next?

Now that we understand the potential of Treasury, how do we make a start?

Here’s one thing you can do today: choose one of the points we looked at above and think about how it relates to your organization. If you’re a business leader, start a conversation today about how you can support Treasury in that part of its development. And if you’re a Finance worker, identify one leader or decision-maker who can help you achieve it.

In this series we’re going to explore the important role of the Treasury Function within both the Finance Function and businesses at large, so make sure you subscribe to receive the rest of the articles.

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If you want to know more about what is happening in the wider Finance Function you can read my latest series "Finance Function 4.0". You can read all the articles in the series below.

Welcome To Finance Function 4.0

The Finance Professional 4.0

Career Paths in the Modern Finance Function

The Art of the Possible for Finance 4.0

In The Age Of Automation, Finance Must Know Their Processes More Than Ever

Finance Transformation 4.0 - Your Action Plan

You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box” where you set the ambition for your transformation. You should join the Finance Business Partner Forum which is part of the Business Partnering Institute's online community where we will continue to discuss this topic and you can click here to follow me on Twitter.

All Successful Business Partners Are "Leaders" (the last article in the series about our new capability model)

Should We Keep Talking About Business Partnering? (part of a 17-article series where we deep-dive on the WHY, WHAT, and HOW of business partnering by putting it on a formula)

Your Journey To Successful Business Partnering Explained

How To Create Value Through Business Partnering

Everyone Can Adopt A Business Partnering Mindset (part of a six-article series about FP&A Business Partnering)

From Business Partner To Working Within The Business (part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)

Is Your Product Optimized For Value Creation? (part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)

How Business Partners Turn Analysis To Insight (part of case study series where I interview business partners about how they drive value creation using real cases)

The Future Of FP&A: Two Ways To Take The Reins

What Is The Accounting Profession Paradox?

What Defines A Finance Master?

The New Career Path For Finance Professionals

How Finance People Can Be More Successful

The CFOs Roadmap To Transforming Finance

How To Become A Finance Business Partner

Financial Analyst vs. Finance Business Partner

Finance Business Partner Is A Bullshit Job

How Business Partners Keep A Plan On Track

Anders Liu-Lindberg is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more than 9,500 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger on LinkedIn with 57.500+ followers.