Defining The Vision For Treasury
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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At first glance, the purpose of Treasury seems relatively simple to understand (although not necessarily to achieve): to manage the flow of money within a company most effectively and efficiently possible.
But in fact, this common definition significantly downplays the potential role that the Treasury function can play in an organization.
As we saw in the previous article in this series, forward-thinking Treasury professionals are constantly looking for new ways to drive value not only for their business but also for external stakeholders. Treasurers and CFOs like Bruno Massera, whom we profiled in that article, are developing innovative schemes and programs that help minimize exposure, improve cash positions, and even protect the health of businesses, their suppliers, and their customers.
Taking a broader view
In most organizations, the Treasury function has huge untapped potential. All too often it is siloed away from the rest of the business, rarely straying beyond its departmental boundaries.
This is a mistake. If Treasury is about managing the flow of money, then Treasury's remit is actually very broad: the operating model for the Treasury function should be to have involvement in and visibility of every part of the business through which money flows.
Let's look at some of the areas in which the modern Treasury function should be active.
Accounting optimization
Collaboration between Accounting and Treasury is, of course, extremely important. The interplay between revenue and expenditure on one hand, and cash flow on the other, is a space in which Treasury can create new value through innovation.
By adopting a business development and partnering mindset, Treasury professionals can work with Accounting to identify pain points in areas such as payment terms to suppliers or management of receivables. Rather than focusing simply on forecasting or the operation of existing processes, innovative Treasury functions can work to understand those processes at a granular level and then ensure that they are continually optimized. To give just one example, Treasury might work with Accounting, procurement teams, and even directly with suppliers to optimize supplier payments in ways that add value for all stakeholders.
Risk management innovation
Risk management is a fundamental part of Treasury activities, and all Treasury functions should have a full understanding of the manifold risks to which the business is exposed.
But, again, the role of an innovative Treasury professional goes beyond reporting or forecasting based on those risks, or simply ensuring that the business has enough cash on hand. In addition to this, Treasury functions should be adopting a strategic outlook, working with other parts of the business to understand the smaller-scale risks and requirements involved in the business's daily operations, and building new processes to help mitigate or fulfill them.
Embedded FP&A
Traditionally, FP&A has existed primarily or exclusively at the corporate level. It was the preserve of corporate Finance functions and was generally a 'top-down' exercise.
There has always been some crossover between Treasury and FP&A, but this intersection presents huge opportunities for Treasury functions and businesses at large. Innovative Treasury professionals are exploring ways in which FP&A practices can be embedded throughout an organization, with resources provided to every part of the business (including, for example, field sales representatives and supplier liaisons) ensuring that the results of on-the-ground work are properly understood by every other function.
Amongst other benefits, this ensures that the Treasury function has clear and complete information provided by FP&A to enable better, more accurate forecasting. Treasury relies on comprehensive and near-real-time data to properly fulfill its forecasting tasks, and, particularly during periods of disruption or unpredictability (whether that be to do with the interest rate environment, changing customer or supplier needs, or even a pandemic), the accuracy of those forecasts is paramount.
Crucially, close collaboration between Treasury and FP&A, along with a culture of FP&A practices and resources embedded throughout the organization, means that Treasury functions are well-placed not only to forecast, but also to develop new systems, models, and practices that can help businesses navigate that uncertainty and seize opportunities as they arise. For some great examples of this, you can again return to our case studies in the previous article in this series.
Moving up the value chain
In each of the areas we've looked at in this article, two themes emerge. The first is about carrying out existing tasks more efficiently, often through closer collaboration between Treasury and other functions. The second is about expanding the role of Treasury itself, turning it from a primarily back-office function into one that is closer to business development. Modern Treasury functions aren't only managing cash and generating forecasts; they're also building new relationships and processes that help businesses grow sustainably and secure better outcomes for customers and suppliers.
So today, ask yourself: what unique properties does the Treasury function have that can be translated into new, value-creating activities within your business? Don't be afraid to think big, and remember the importance of inter-function collaboration. By expanding Treasury's remit and ensuring that it has a stake in every business process, we can turn the Treasury function into an engine of growth.
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This was the third article on my series about Treasury. You can read the previous article(s) below. If you would like to be involved in this series and share insights about the latest developments in Treasury, don't hesitate to reach out!
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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.
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)
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)
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 60.000+ followers.
Retired
3yVery good article, Anders because you did a wonderful job!!!!
CEO @ TreasuryPros | Treasury Management Consulting, Financial Literacy
3yAnother excellent article Anders.