Partnering with global business services (GBS) helped one treasury team boost cash visibility and achieve consistency.
Companies expanding globally have often left regional affiliates with their own treasury back offices to support the local business, resulting in fragmentation of the treasury function and costly inefficiencies. That takes time away from corporate treasury that could be spent addressing more strategic issues.
- “Preaching the gospel of global treasury operations,” the assistant treasurer (AT) of one NeuGroup member company said, required convincing local business leaders that corporate treasury didn’t seek to wrest control.
- In the case of cash, he told those leaders, “We’re not here to take it, but to make sure you have the cash you need, when you need it.”
Reaching out to GBS. Treasury’s first practical step to reduce the fragmentation of operations was to reach out to global business services (GBS) centers for Asia-Pacific (APAC); Europe, Middle East and Africa (EMEA); and Latin and North America.
- Corporate treasury explained that fragmented treasury options made it difficult for the company to locate and measure cash in a timely manner, and to track bank accounts and their signatories.
- Among the questions the AT asked: “Can we partner with you and build out regional treasury operations centers, to bring that work to those centers and bring consistency to fundamentals such as opening and closing bank accounts?”
Dividing duties. Key to the argument was clarifying that corporate treasury would control the strategy and the health of the processes, including the company’s in-house bank and global treasury operations, while the lower-cost GBS centers would retain responsibility for operational execution.
- The approach to implementing the initiative in each region differed, since each GBS center was at a different stage of development.
- The regional treasury office (RTO) teams now report administratively to the GBS operations leader, while taking much of their technical direction from corporate treasury.
- The exception is EMEA’s GBS, which houses the in-house bank, where employees also administratively report directly to corporate treasury, “because of the complexities of the work and the close linkage they have with executing treasury strategies,” the AT said.
The benefits. Consistency is first and foremost, the AT said, adding that while the approaches to centralizing treasury activities in the GBS centers may have varied, the processes and standards they apply across the globe are now consistent.
- That should reduce “hiccups” stemming from local treasury offices entering into hedges without fully understanding those instruments, something that in the past resulted in unnecessary costs and risk, a comfort to him and the treasurer, the AT said.
- With its regional treasury centers now all using the same treasury management system (TMS), corporate treasury has 90% visibility into its cash, enabling balance sheet cash to be slashed in half, a boon for a net-debtor company from a credit perspective.
- Centralizing treasury around those centers has expanded the use of a tool to uncover unnecessary or excessive bank fees. “That’s enabled us to get more competitive pricing from our banks quickly,” the AT said.
- The Latin American treasury team center often spent a majority of its time reconciling prior-day transactions, the AT said, and now, with access to the TMS, “That team can deploy their intellectual capacity in other areas that produce savings for the company.”
