The path to digital and strategic treasury

It’s not a secret: many industries are facing a massive transformation – the world is more globalized than ever; manufacturing of goods can happen in remote places, your business can rely heavily on the supply chain, and even your workforce may be scattered all over the globe (possibly working from home). These are just a few examples of why businesses also need to change. Other extreme factors such as Covid-19, the Ukraine war, global supply chain disruptions, and rising interest rates also push organizations toward rethinking their strategies and priorities.

Digital transformation is a massive change management effort across the organization

More and more businesses are asking the big question: How do you put your company on the path of digital transformation? It’s not a new topic, it’s been on the agenda for years, and perhaps, you have read plenty of articles about it. Some companies have even created entire departments responsible for change management, putting the organization on the path of digital transformation. Although you may have a department for initiating change, they cannot make plans without your involvement. To achieve complete transformation, most departments must adapt – and in many organizations, treasury has also started to change.

Get board and C-level buy-in

Just like businesses are looking to make big bets on digital processes and ways of workings, treasury leaders are also evaluating how the digitalization of treasury processes could evolve their operations to a new strategic level.

Even if your whole organization is not yet on the digital transformation journey, treasury can still start to make a significant shift. It’s good to remember that it’s better to have support from your C-level leadership and even from the board of directors. Usually, treasury transformation can take time – even a couple of years. At the same time, you must ensure that your department is entirely operational to deliver daily tasks (like ensuring payments are made, cash balances are adequate at each entity, etc.). Simultaneously, you will also need to implement new working methods, processes, and technologies.

The change may also require significant financial investment from the business – so you should build your business case on when the organization will see the return on investment. Creating the business case should happen before crafting a detailed roadmap, but already at this point, you would need to have a concrete idea of what you would focus on within the treasury department, what tools and solutions you would need, and whether you should make additional critical hires for your department.

To complete the transformation, you may also need to partner with other departments, such as IT. For the best cooperation and availability of resources having buy-in from the organization is essential.

Treasury transformation is for everybody

As you read this article, you may wonder whether digital transformation is suitable for your treasury. During the past years, we have seen various transformation projects. While some organizations only want to automate a particular manual process and ensure one standard procedure for all entities and don’t need to hire and train multiple FTEs, others plan major undertakings on various fronts for the next 5-10 years.

While some organizations may start “small” – like implementing a payment factory and once the implementation is ready, they may think about what to do next, others can have a very concrete plan for which solutions to implement in which order.

It’s rare, but not uncommon, that treasury wants to realize cost savings by implementing new technologies. Nevertheless, the most common scenario is that the treasury seeks to gain operational efficiency so that the department would have the time and resources to focus on more strategic tasks.

Financially stable companies are leading the way in transformation

While it’s always beneficial to have visibility into your cash positions, financially stable companies with good cash flows and liquidity positions understand that having real-time information on cash inflows and outflows is an enormous advantage, and they want to be able to control their risks and investments better by having access to timely data. These companies have been leading the way in treasury transformation and encouraging their peers to utilize available treasury technologies more and better.

3 steps to transform your treasury

1. Redefine the role of the treasury department

The most crucial starting point for the digital transformation of treasury is to clearly identify your areas of responsibilities as of today and to which areas you should extend it. When identifying new responsibilities, look at the bigger picture to understand how expanding treasury will contribute to the overall strategy and competitiveness of the organization – this will help you with prioritization.

While treasury should never aim to generate profit (e.g., never gamble with currencies on the FX market), smarter, more strategic treasury operations can seriously support a company’s growth plans and competitiveness in the market by managing the company’s cash and liquidity better and support with strategic investments.

2. Invest time in creating your strategy and the plan

When you understand that it’s time to make changes, then it’s time to create your strategy and plan.

First, start with a business case: why should the rest of the business care? Why should the company invest in this project? What will you need from other departments? What is the investment level? When will the project have a return on investment?

To craft a successful business case, you must have a clear vision and understanding of what you want to achieve. It will require time to do your research, and in many of the cases, we see that companies are seeking help from consultancies – whether it’s from the large consultancies or from the ones that are focusing on treasury exclusively, like Zanders, Enigma, or Orchard Finance.

Once you have built the business case and got the buy-in, it’s time to finalize your strategy and the plan. If you need to implement new technologies, create a clear and well-defined roadmap and find the right partners that help with the technology implementation. Treasury consultancies like those mentioned above can also help navigate your way among solution providers and treasury technologies.

Another way to gather ideas is to attend treasury events and network with peers. Almost all treasury conferences share case studies on what other companies are doing and speakers are usually more than happy to chat with you and share their learnings, so don’t be shy and go out there to meet your fellow experts!

3. Clearly identify your goals

Clearly identifying your goals goes hand-in-hand with redefining your treasury operations and crafting your strategy. Having clear goals will help you to create a better project plan and start the work while remembering that you are still responsible for the day-to-day work.

Treasury transformation will look different in every company

Your goals and therefore your plan should be aligned with your company's priorities – this is also why treasury transformations will look different in every company. Some companies may want to fetch real-time data from various source systems and use it to build liquidity reports using a tool, others may look at digitalizing all aspects of their treasury operations.

What’s certain: you need to start somewhere! The best start is to gather all the information you can find or get from peers and craft your vision of what the future of treasury could look like in your case.