How the treasury department can play a strategic role in the CFO’s office

New responsibilities of the treasury department

Treasury Department as a strategic advisor

The treasury department is no longer considered a back-office role because it not only controls cash, working capital, risk management, and overall treasury efficiency, but it also acts as an internal strategic advisor to the CFOs through proactive treasury management.

Treasury is responsible for cash management and forecasts, bank reconciliation, loans and borrowings, foreign exchange, and taxes. However, as the world became more globalized, treasury began to focus on recognizing and investing in new sources of income, managing risk, detecting bottlenecks, and developing financial policies and rules.

Currently, treasury requires high visibility over cash flows and quick access to data to get better insights for decision-making as the market is prone to volatility. To keep ahead of the curve, treasurers should create a list of treasury KPIs that helps CFOs measure their performance and plan new financial strategies to fast track goal achievement.

Changes in treasury roles

• Treasurer: Treasurers need to improve their communication and technological skills, as well as be more proactive in making choices based on real-time data.
• Treasury Manager: Managers need to concentrate on KPIs and strive to improve processes on a continuous basis. They need to improve their ability to plan and operate a business.
• Treasury Analyst: To discover errors, improve reporting, and aid in process improvement, the analyst’s job must be more analytical. The most important thing they can do to improve their roles is to improve their communication and technical abilities.

3 Ways the treasury department can play a strategic role in the CFO’s office

1: New-age KPIs for treasury department

Treasury KPIs are metrics used to track and analyze the performance of treasury. CFOs must establish the appropriate and latest treasury KPIs for liquidity, funding, financial risk management, and overall corporate governance.

• List of treasury KPIs for treasurer
  • Hedging FX KPIs
  • Short-term investment KPIs
• List of treasury KPIs for treasury manager
  • KPIs for critical tasks
  • KPIs for process accuracy
• List of treasury KPIs for treasury analyst
  • KPIs for cash concentration balance
  • KPIs for accurate vs. forecasted variance
• List of treasury KPIs for the overall treasury department
  • Cash visibility KPIs
  • Cash flow forecasting accuracy KPIs
  • Measuring financial health KPIs
  • Risk management KPIs

2: Benefits of the KPIs for the treasury department

KPIs for treasury department is an effective way to objectively monitor treasury activities. By evaluating the various treasury metrics on a regular basis, management can ensure that all team members are working as efficiently as possible, while also highlighting any areas of concern.

Benefits of treasury KPIs for treasurer

• Hedging FX KPIs: Higher hedging FX KPIs allow companies to take advantage of a favorable exchange rate or a successful investment and to prevent pulling funds out of a foreign company unit at the wrong moment.
• Short-term investment KPIs: Treasurer can undertake short-term liquidity planning without missing any investment opportunities by keeping track of daily cash movements. Additionally, the treasurer can also address investment feasibility for buying assets, M&As, and business expansion.

Benefits of the treasury KPIs for treasury manager

• KPIs for critical tasks: By maintaining these KPIs, treasury managers can easily identify weaknesses in the revenue cycle and prevent falling short on cash during volatile times.
• KPIs for process accuracy: It assists in maintaining high cash flow accuracy by identifying pitfalls of treasury management.

Benefits of the treasury KPIs for treasury analyst

• KPIs for cash concentration balance: It allows for better and more immediate detection, measurement, and understanding of critical risk factors which enable treasury analysts to approach the C-suites for making borrowing decisions to maintain cash concentration.
• KPIs for accurate vs. forecasted variance: By leveraging AI cash forecasting tool, analysts can drill down into forecast variance to continuously variance analysis.

Benefits of the overall treasury KPIs

• Cash visibility KPIs: It allows a business to invest capital wisely while reducing debt and expenses. Accurate visibility also lowers a company’s risk exposure while increasing its potential for growth.
• Cash forecasting accuracy KPIs: It helps maintain high forecasting accuracy through analyzing forecast discrepancies at the cash flow category, regional, and corporate levels to identify, report, and correct causes.
• Measuring financial health KPIs: It provides a fair and regular analysis of the financial health of a company by determining the cash deficits or surpluses by tracking the cash flows and planning accordingly for investment and borrowing.
• Risk management KPIs: In recent years, the treasury department has taken on more responsibility for financial risk management. Risk management KPIs can assist the CFOs to identify where the company’s biggest risks are and evaluating hedging efficiency by keeping a close eye on them.

3: Effective cash management system to keep track of the treasury KPIs

Cash flow management applications can be used to track cash flow drivers and track progress toward treasury goals. It gives cash visibility in real-time, assists in monitoring intraday and prior day cash positions, and converts cash balances into base currency using current currency exchange rates. Regularly reviewing KPIs helps proactive financial planning by ensuring end-to-end cash flow visibility.

Benefits of cash management software in keeping track of the treasury KPIs

• Keeps track of daily responsibilities and treasury department goals.
• Assists treasury analysts to better manage liquidity by providing detailed variance insights.
• Enables treasury managers in the management of important tasks and the enhancement of processes.
• Allows treasurers to make strategic decisions on debt or investment with AI cash management software.
• Provides accurate and dependable treasury operations insight to CFOs, board of directors, and investors.

Get in touch with our solution expert to leverage AI treasury management solutions to continuously monitor the treasury KPIs.