Treasury management is the lifeblood of the business and probably the most important function of finance. Every company, fund, or family office (i.e., FO) must manage its treasury. Unfortunately, often without a dedicated treasurer. The question is how to manage it and with which IT tools. Today, this vital management for any type of company, including FO’s, can be managed like by the largest multinationals, with IT tools and platforms that are easy to set up or rent, and with an external treasurer. This is called "Treasury as a Service". Treasury management is becoming "Uberized" to be more efficient.
Treasury remains a mysterious discipline
For some, treasury management still seems mysterious. However, it covers a series of essential tasks. Treasury is the management of all secured financial payments, it is the management of liquidity and the leveling of bank accounts, it is the management of possible debt, currencies and hedging of exchange risks, of any financial risk, it is the insurance of liquidity when it is necessary, it is the valuation of portfolios of financial instruments and other assets, in IFRS and in "Mark-to-Market" (i.e. IFRS9) and it is the production of cash flow forecasts and compliance reports, both financial and non-financial reports necessary for the optimal management of a Family Office resources. But there are many more tasks. Given the increase in fraud and cyber-attacks, the automation of treasury processes, banking connectivity via secure SWIFT channels and the need to automate accounting reconciliations and reporting make treasury a more important focus than ever. COVID has reinforced the need for more effective cash management. Moreover, professionalizing treasury management represents an investment with a very positive Return on Investment (ROI) and an immediate pay-off. Professional treasury management has become accessible to all.
“Managing treasury is not only the prerogative of large multinational companies. On the contrary, cash management has been "democratized" and is now accessible to everyone thanks to technology”
Treasury for everyone
Managing treasury is not only the prerogative of large multinational companies. On the contrary, cash management has been "democratized" and is now accessible to everyone thanks to technology. Everyone does or should do treasury management (i.e., payments, financial transfers, investments, portfolio valuation, account leveling, financing, cash-flow forecasting, currency hedging and inter-company financing, etc.). Often "family office" type structures outsource to specialized management companies. However, treasury is key because it concentrates all the financial risks and is at the heart of all the family office's activities. Securing and automating treasury operations is vital, to facilitate and perpetuate the banking relationship and to achieve maximum financial efficiency. Moreover, for the purposes of substance (i.e., BEPS), if there is a function to internalize, it is this one. Reserving this activity to the largest companies or outsourcing it to companies that do not specialize in treasury represents a financial risk, an operational risk, and a loss of revenue. Given the amounts involved, we can only recommend that FO’s professionalize their tools and human resources, possibly by using a specialized third party. Modular platforms allow to manage cash flow, to ensure banking connectivity via a secure and protected SWIFT channel, to limit any risk of payment fraud and to automate reconciliations by receiving and integrating bank statements in XML ISO 20022 format. The belief that you can't use the technology of the big guys is false. Some maintain this myth because they cannot deliver this type of service to their customers. It is obvious that since the volume may not justify a full-time treasurer, one can use treasury as a service or managed services or put a part-time treasurer on one's payroll who will manage all the treasury with a high-end tool at very low cost. It is virtuous because you secure your activities, help your bankers who have reduced costs by automation and connectivity (direct and not electronic banking life or token) and finally because you make significant savings in financial costs.
Technical and human solutions
Today there are platforms to manage treasury and companies providing the experts by hiring their services or offering to put them on payroll for substance and control. Given these solutions, to do nothing would be culpable. Homeworking has crystallized the risks and demonstrated the need to professionalize the function. These platforms also make it possible to mix services according to needs and to be as efficient as a multinational company without the costs. In a future article we will tell you more about how to modernize your cash management and achieve significant recurring savings, while better securing your processes.
François Masquelier, CEO of Simply Treasury
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