Treasury Skills of the Future

Treasury practitioners told us that investments in people are just as important as investments in treasury tools or systems—perhaps even more so. "You can set up whatever systems and structures you'd like," said one treasurer, "but they're not going to be successful if you don't have the right team and they're not ready for it."

To succeed in the next normal, treasury teams will need to embody a range of skills. Study participants reported that treasury, accounting, and finance skills are necessary for every treasury professional; they grant a core level of competency in treasury. But treasurers also told us that soft skills are what truly separates the best from the rest. Some of the soft skills mentioned most frequently in the study include communication, a growth mindset and appetite for learning, and professional agility.

Communication.  Effective communicators are good data storytellers with a knack for explaining the drivers of the numbers to executives and key stakeholders. For example, one assistant treasurer told us, "When you're having C-suite meetings or board meetings, you only have a certain amount of time to get your point across to that audience, and you have to get it across really well." Effective communication becomes even more important for treasury leaders in a remote environment, when people are communicating virtually and opportunities for fraud are rife.

Growth mindset.  The most effective treasury professionals have a hunger for continuous learning. This helps them to implement current and emerging best practices and to maximize the value that their treasury organization is delivering to the company. "We are in an environment where we need to continually reach out and educate ourselves," one treasurer said. "For example, what KPIs [key performance indicators] are others using that we're not? What do I need to be mindful of that I'm not? Continual learning will help me see that there's something coming and be able to take appropriate action."

Agility.  The business disruptions caused by Covid-19 have tested the agility and flexibility of many treasury departments. As a result, treasury professionals have been challenged to display a deep knowledge of their roles while also having the flexibility to address emerging issues and solve problems in real time. As the assistant treasurer of an energy company told us: "We're all being required to change on a dime. We have to be able to help where we can by finding solutions and answering questions from the global business. We have the expertise in treasury to help the rest of the organization in certain areas, such as trade finance and banking relationships in other countries."

The increasing value of soft skills in treasury does not negate the importance of technical and technology skills, like a working knowledge of treasury software systems. Having some degree of tech savviness not only helps treasurers learn new technologies more easily, but also empowers them to help others. "We can't all learn to be programmers," one treasurer said, "but we need to be able to use the technology and answer questions that other people might have about it."

Critical Treasury Practices in the 'Next Normal'

In addition to developing the right skills, treasury leaders need to make sure they have the right controls and policies in place. Especially in these times where remote work has increased exponentially, treasury's success depends on clear, well-documented, and well-communicated policies. Effective policies help set the stage for success while mitigating relevant risk exposures.

This is clearly an area in which many organizations have room for growth. Although 89 percent of our survey's respondents reported that their organization has established a formal corporate treasury policy, fewer than half of these companies communicate the policy extensively across the enterprise. Further, only about half of these respondents reported that employees extensively adhere to the treasury policy. (See Figure 1.)

This indicates an area of potential risk for respondents. When policies and communications are not clear, or when people do not follow them, that opens the door for bad actors inside and outside of the organization to take advantage of the situation through fraud.

Corporate treasurers also need to build better control over cash management and increase their influence in areas like financial planning and analysis (FP&A), accounts payable (A/P), and accounts receivable (A/R). Enhancing the treasury team's visibility into key finance processes including A/P and A/R helps ensure more accurate cash forecasting. It also enables treasury to look more closely at how the organization is using resources and to identify savings opportunities.

Similarly, visibility into bank accounts, fees, and banking relationships is critical, as it arms the treasury team to reduce the risk of fraud associated with cash inflows and outflows. We found that organizations have plenty of room for growth in both areas. Only 17 percent of respondents said they have ideal visibility into A/P and supplier processes. Further, only 15 percent of respondents said they have daily visibility into more than 90 percent of their bank accounts. (See Figure 2).

Our analysis found that the following practices are statistically associated with higher levels of cash forecasting accuracy:

• Better visibility into bank accounts;
• More visibility into A/P-related processes and supplier-related activities;
• Higher levels of visibility into A/R-related processes and customer-related activities;
• More collaboration among treasury, A/P, and A/R; and
• Direct control of treasury technology.

Collaborations to Provide Strategic Support for the Business

Treasury groups do their best work when they collaborate across the organization, especially with areas such as A/P and A/R. Collaboration between treasury and the accounts payable and receivable functions helps drive deeper insight into the "how" and "why" behind an organization's cash inflows and outflows.

A large majority of respondents to our survey (80 percent) said that treasury's collaboration with other departments and company leaders deepens the understanding of the "why" of cash flows. This understanding, in turn, helps drive treasury's value to the C-suite through more accurate cash forecasting—which impacts the bottom line through more strategic cash management.

Broadly speaking, survey respondents' treasury organizations are collaborating effectively across a wide range of functional areas. Figure 3, below, shows that a majority of survey respondents reported some degree of partnering with many areas of the organization, although much of this partnering happens "to a moderate extent." It is clear that treasury has the opportunity to deepen these relationships in order to help all these groups deliver more value to the bottom line.

The most successful treasury organizations go beyond transactional work and are frequently tapped by the C-suite to provide strategic decision support. Unfortunately, relatively few respondents to our survey (24 percent) reported having this level of strategic value to executives. Nearly half reported providing guidance to the C-suite in some instances, but 28 percent of treasury functions are seen by their organization's executives mostly as a transactional center for cash and banking operations.

Treasury's opportunities to act as a strategic partner to the business and the C-suite have exploded as a result of Covid-19. Treasury leaders need to embrace these opportunities and capitalize on each and every one. By leveraging their unique expertise in areas encompassing customer relationships, supplier relationships, financial and operational risk, and right-sizing technology within and beyond their function, treasury professionals can and should, as one treasurer noted, "help to future-proof the company by providing solutions with our expertise."

Accelerating the Treasury Technology Maturity Curve

Emerging practices resulting from advances in technology over the past few years—including real-time payments, the use of mobile and cloud-based tools, and data analytics—are helping drive treasury's evolution to the next normal. More than half of respondents (58 percent) said they leverage real-time payments to at least some extent for treasury management.

Treasury teams are increasingly using these tools, along with game-changing technologies like robotic process automation (RPA) and cognitive computing, to reduce manual work and gain higher levels of visibility into A/P- and A/R-related processes.

RPA has been a game-changer for many organizations, helping to reduce manual workloads, increase accuracy, free up time for value-added activities, and enable digital processes and workflows. For example, Mallinckrodt Pharmaceutical leveraged RPA technologies to build a bot that navigates bank portal logins, extracts data from six banks in a variety of formats, and generates a daily cash report. Ultimately, this solution helped the organization reduce its daily cash report cycle time from an hour or longer to around three minutes. This improvement gave the treasury organization more time to develop new skills.

Through APQC's Open Standards Benchmarking Treasury Operations Assessment, we found that more than half of treasury organizations (54 percent) have implemented RPA to at least some extent, although only 18 percent have fully optimized its use to support treasury processes.

Cognitive computing—self-learning computer systems that use data mining and machine learning to simulate human thought processes—is also attracting a lot of interest from treasury functions. Cognitive computing can provide insights into vast amounts of structured and unstructured data.

Four out of every five respondents to APQC's Treasury Operations Assessment are at least experimenting with cognitive capabilities for optimizing working capital, although only a quarter have fully implemented this technology. The 20 percent of respondents who are not even considering cognitive computing solutions are missing an opportunity to reduce manual work and provide more sophisticated insights to decision-makers.

Measuring Treasury Success in the Next Normal

What gets measured is what matters within finance and accounting functions, and treasury is no exception. However, our recent study found a lack of consensus around how treasury organizations' success should be measured.

Respondents frequently mentioned metrics like cash forecasting accuracy, operating cash flow, and the cash conversion cycle as effective measures of treasury success. However, no single measure (or group of measures) was identified by a majority of survey respondents. The most frequently cited measure—cash forecasting accuracy—was cited by 41 percent of respondents, with operating cash flow close behind at 38 percent.

In the remote and digitized work environment that has emerged from the pandemic, organizations should also consider measures related to risk management. "Risk management is becoming more important to what we do here in treasury. It is probably one of the most important things we do," said one assistant treasurer.

Despite its increasing importance, risk management is overlooked when many organizations are developing treasury metrics. Only 41 percent of respondents to our recent survey track the speed and effectiveness of risk mitigation as a treasury success measure, even as new risk exposures increasingly fall within the scope of treasury's responsibility. As the business environment continues to change, treasury leaders should actively identify emerging and amplifying risk exposures across financial and operational areas of the business to make more informed decisions related to risk management investments.

As the treasury function continues its journey to the "next normal," leaders will have numerous opportunities to invest in their people, processes, and technology. Along with making these investments, treasury organizations need to identify and track the measures of success that demonstrate treasury's value, help drive better performance within and beyond the function, and empower staff to deliver greater strategic support to the business.

Treasury groups that achieve these objectives will drive value for their company and earn a seat at the strategic table, regardless of what the 'next normal' brings.

See also:

• Think Beyond Traditional Treasury Success Measures
• Strategic Support: Practices of High Performers
• Top Treasury Skills and Aptitudes for the 'Next Normal'

Rachele Collins, Ph.D., is principal research lead for financial management research at APQC, a nonprofit, benchmarking, and best practices research organization.

Nathanael Vlachos, Ph.D., is a writer and analyst for APQC.

Ernie Humphrey, CTP, is the CEO of 360 Thought Leadership Consulting as well as Treasury Webinars. He served as director of treasury services for the Association for Financial Professionals (AFP) and has spoken or provided moderation for over 500 thought-leadership–focused webinars on topics including A/P, A/R, and treasury technology.