The purpose of Treasury is to manage a company’s funding, liquidity and to mitigate its financial and other risk. Made up of three sub-disciplines, Treasury’s overall objective is to safeguard the company’s holdings and to follow the long-term strategy set forth by Corporate Finance (and strategy). Cash Management, on the other hand, is primarily focused on operational, short-term, efficiency and process optimisation, whereas Risk Management is oriented towards financial research and operational controls.

Michael Ringeling, corporate treasury expert,  made a top 5 of the most common pain points he encounters in Treasury, including consequences and a solution.

Top 5 of the most common pain points in Treasury

 

1. Too many bank accounts at too many banks

Consequence:
Complex to manage, poor control, higher risk of fraud, higher costs, more KYC/AML requirements

Solution:
Less bank accounts at fewer banks, all via one or two electronic banking systems or multibank platform to manage payments and cash flows. The result will be more efficient, more secure and more cost-effective payment transactions, reporting and reconciliation into the ERP system.

2. No reliable cash flow forecast

Consequence:
Poor liquidity management. Insecure about the required short and long term funding and poor management information.

Solution:
A good cash flow forecast, providing adequate insight in the organisation’s short and long term cash flows, will contribute to an efficient funding strategy and lower cost of funds.

3. FX results, (negatively) impacting the company’s P&L

Consequence:
The company’s financial results are impacted by unforeseen and unknown FX results

Solution:
FX risk management analyses, create a FX policy and perform deal execution (hedging) to control FX results

4. New Loan Agreement needed – negotiations

Consequence:
Difficulties in assessing if the loan terms and conditions are fair. Risk of overpriced loans and/or unfavorable terms and conditions required by the bank(s).

Solution:
Assist the company when negotiating with the bank(s) to get a fair deal with terms and conditions that will not unnecessary limit the company’s flexibility.

5. Cash is trapped on too many stand alone bankaccounts around the world

Consequence:
Company cannot effectively use a significant amount of cash, resulting in higher (short term) loans and higher interest costs.

Solution:
Implementation of a cross border cross currency cash pool to centralise the company’s cash balances. As a result the amount of local trapped cash will be reduced and that cash can be used for general corporate purposes. Less short term loans and lower interest costs.

Sounds familiar?

Do you recognize the pain points that we mention above in your business? Or are you experiencing other critical treasury pain points in your business?

In our active network there are several treasury experts who can offer treasury support. They can be hired for specific projects or on a regular basis. Check Rent a Treasurer and let us help you.

 

Michael Ringeling

Corporate Treasurer Expert