Treasury is a function in transition. Not too long ago, the corporate treasurer was usually seen as the bill payer of the company, the manager of cash flows but little else. It was a transactional role that sat squarely in the middle of the finance cost center. But today, the corporate treasurer is often seen as a strategic partner to the business units, and many companies consider their treasurer an executive-level decision-maker.
Other treasurers are looking at credit issues. For example, we’ve seen some companies where a third-party contract manufacturer may not have the best credit and treasury helps the company stand between the provider of the materials and the contract manufacturer to reduce the credit risk, because that was a pass-through cost anyway.
These are diverse examples, but they show the range of different higher-level activities that treasury is getting involved in within some companies.
Another important step is to implement the most efficient processes and technology infrastructure possible. Treasury tends to have a smaller staff than most other departments; that makes technology even more crucial to treasury. What technology ultimately does is provide scalability to the treasurer by pushing the transactional work down into the system, which frees up staff time for more strategic, value-added work. It also provides scalability, by virtue of the fact that the treasurer can take on more responsibilities without adding staff.
Most treasury functions were not designed, per se. They just evolved over time. Very few people start with a blank sheet of paper and say, ‘Hmm. How are we going to build our treasury today?’ It’s more like ‘Here are our immediate needs: We acquired this company; we divested that company. We have three legacy systems. We have staff with these skills and we currently need those skills.’ Failure is never an option in treasury. Money has to go out by 3 p.m., so money gets out by 3 p.m. Nobody outside of treasury asks how it got out; they just ‘scream and yell’ if it doesn’t get out on time. So historically the treasury team has found workarounds when necessary to get the job done. They’ve used spreadsheets, they’ve found bolt-on systems. Now there is a movement to try to clean up and make treasury more efficient.