Treasury without treasurer

When should you hire a treasurer and develop a dedicated treasury department? Then, when should you implement a treasury tool? These are the questions we aim to answer. It is complicated because there is no perfect answer. It depends on each case. However, technology and outsourcing allow us to equip ourselves like the best. So why should we wait? We give you some keys.

Threshold for hiring a treasurer

I have often heard the question of how big or small a company should be to have a dedicated treasury department and an experienced treasurer. This is a tricky question that is impossible to answer. At most, we can give indications of the size and complexity that require a seasoned treasurer. But unfortunately, there is no perfect answer. I would say: it depends. However, like Monsieur Jourdain (i.e., Molière) who was writing prose without knowing it, every company does treasury operations, at whatever level. In the smallest structures, it is often a Financial Director, an accountant or any other person versed in numbers and equipped with a version of EXCEL. Not doing treasury is unfortunately impossible. When you pay down a loan tranche, fix a rate, hedge a foreign currency, cover a negative current account position, place cash in a bank deposit, you are doing basic treasury, perhaps without knowing it. The problem comes when the transactions become more sophisticated, numerous, complex, and daily. This is where a solution is needed. It is twofold: either you hire a dedicated and specialized person, giving him the technical means, or you decide to subcontract to experts who manage the treasury daily.

Technology at the service of treasury for all

The beauty of technological evolution and new IT solutions is that they allow today, with “SaaS native” solutions, to manage cash easily and to implement these tools quickly and at low cost. The days of Treasury Management Systems (TMS) reserved for large companies because of their high price are over. There are now more affordable and accessible solutions. The cost and implementation time factors are reduced and enable access to smaller companies. However, the problem remains real. You offer me a car, for a reasonable budget, but unfortunately, I don’t have a driver’s license. What should I do? The solution is to hire a driver (i.e., a treasurer) or to outsource to treasury specialists, with tools.

Treasury, as a mean to reduce financial costs

However, treasury is virtuous because it allows to reduce costs, by the implementation of cash-pooling, by a dynamic management of excess liquidity, by a consolidated and centralized approach of the debt, by the automation of payment processes and reconciliations, by the reinforcement of internal controls, by the expertise when hedging financial risks, by the application of coherent strategies of the banking relationship, by the negotiation of the fees and margins applied, etc… Having a treasurer has a cost, can be a luxury, but it also enables to significantly reduce costs. Doing an ROI for medium sized companies that would not think they are big enough to justify a tool and a treasurer, are often surprised by the result. It’s amazing and encouraging. This is why I bet that many SME’s or mid-cap’s will have tomorrow a professional treasury worthy of the name, as efficient as those of multinationals. The same goes for hedge funds, Manco’s and other family offices, which will be able to have their cash managed like the big guys. No, cash management is no longer and will no longer be the sole preserve of large international companies.

Treasury for all

In the future, treasury will be available to everyone, and every company of a certain size will be able to manage its treasury in a dynamic, professional, and efficient way, thus greatly reducing its financial risks. The technology, by its progress, allows faster implementation and more affordable system rentals. The icing on the cake is that the missing element, the treasurer, or the expert, can also be outsourced to experts. We can only encourage companies to have this type of diagnosis performed, often free of charge, to measure the usefulness of this management and the qualitative and quantitative gains generated. You will no longer be able to write prose without knowing it, like Monsieur Jourdain in Molière.

François Masquelier,  Simply Treasury  –  December 2021.

Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).

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