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.