The role of treasury is continuously changing. Treasurers are expected to be business partners within companies and to deliver data that can be used for strategic decision-making. But they also face pressure to work more efficiently and to improve their performance – with fewer resources available. For many treasurers these trends are a clear incentive to (further) centralise treasury operations. But where should they start?
Much has been written about this topic. Type ‘treasury centralisation’ into any browser and in an instant millions of hits pop up. And it’s easy to be overwhelmed by all the buzzwords, like machine learning (ML), robotic process automation (RPA), APIs, payments-on-behalf-of (POBO), and in-house banking (IHB). With all of them promising the holy grail of centralisation benefits.
So, how can treasurers navigate the jargon-filled maze and define tangible steps to become more efficient? To begin with, let’s take a look at the main benefits of treasury centralisation:
- Increased control and visibility over cash, setting up one centralised access and view over (global) cash positions.
- Access to financing and liquidity, enabling corporates to turn inwards to drive growth and value, with strong focus on capital structure (funds can often be more effectively obtained at group level).
- Operational efficiency and risk mitigation, with standardised business processes run from a central location.
- Integrated FX , enabling centrally managed FX providing benefits including offsetting foreign currency positions.
The above is just a small selection of drivers and benefits. Of course, there can be different drivers depending on industry, treasury maturity, geographical spread, and a multitude of other factors.
The first step in this journey is to assess the current level of centralisation and the desired level. Using a simplified model defining five treasury maturity phases, treasurers can assess their current state. The model is based on the premise that the higher the level of treasury digitalisation, the greater the level of standardisation, control and visibility. Each phase identifies several treasury tools specific to that particular phase.
Once the current state has been established the desired level of centralisation needs to be defined. Our experience shows that centralisation is an organic process, with tools from different phases existing side by side.
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