Treasury technological leadership supports improved company performance

The technological leadership matters in terms of treasury and is a sign of company performances. Corporate treasurers are reinventing their roles and organization to support business growth while maintaining focus on efficiency, managing financial risks and optimizing the use of capital across the entire cash lifecycle. Meanwhile, the emergence of new technologies is changing business models. Digital business models are accelerating the pace of interaction across the company supply chain, increasing the velocity of cash and creating new challenges for treasury management. Technology enables treasury to move from (semi-)manual processes led by people to full and hyper-automation.

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When treasury technology rhymes with a company's overall financial performance

The most financially successful companies are those with the most technologically developed and sophisticated treasuries. This correlation seems to emerge from studies and surveys. This is hardly surprising, given that cash flow creates added value and symbolizes financial optimization. The opposite is rare in MNC's. Let's look at this proven fact (in general, as exceptions do exist) to ask why there aren't more CFOs investing heavily in their cash management. Leadership in management and innovation, which must come from the top (i.e. “tone from the top”), helps the overall performance of the whole. Cash flow is a kind of indicator or marker of financial health when “best in class”. Technology increasingly powers data-led insights. Many MNC’s still struggle to set foundation of strong treasury fundamentals (e.g. optimum cash management, accurate CFF, centralized banking relationship management, hyper-automation of process leading to strong internal controls, optimized working capital, effective mitigation of financial risks, dynamic currency management fully automatized, in-house banking through virtual accounts, etc..). This is not without good reasons, and it explains why many MNCs face technological debt or deficit. They are plagued with manual processes (or semi-manual processes embedded with XL sheets), poor data and misuse of them, and underinvestment in technology and treasury talents, when more than ever we need top guns. In the face of rising expectations and demands from C-levels and stakeholders for more leadership, treasurers are seeking guidance to shape their investment roadmap. Treasury leadership and innovation bias do matter for the corporations.

Advanced treasury technology supports company financial performance

It appears that MNCs having nurtured treasury teams to be leaders in their field enjoyed better financial performances. Therefore, treasury performance and company profitability (incl. ROIC) are highly correlated. Given this implacable observation, one might well ask why CFOs don't try to inculcate and inoculate more innovation and automation within their treasury teams. Their often-non-treasury background, their lack of interest in a highly technical function and a lack of vision of the opportunities offered by extreme digitalization explain this situation. To the CFO's credit, isn't it up to the treasurer to demonstrate the potential added value and benefits of these investments? It's a question of a lack of “good communication” and persuasive power. Many companies are hampered by disconnected processes, systems and data, partly due to inadequate past investment in resources and technologies. As a result, many MNCs needs now to play catch-up by establishing process fundamentals, by using technologies to hyper-automate processes (still semi-manual) and enhancing data quality to benefit from digital advancements. Treasury performance can be an effective predictor of the ability to translate revenue to earnings. Performances of treasury should be ideally measured to enhance the situation. Don’t start a diet without buying first a proper machine to assess kilograms lost.

Companies digitally enabling pace accelerating

Generally, more performant treasuries are also more digitalized. Opportunities for treasurers exist utilizing emerging technologies for more timely data (real-time being the new target), more advanced analytics (faster produced), and utilization of machine learning and artificial intelligence (for virtually assisting treasurers). Leading MNCs are leveraging digital transformation as a key enabler for more hyper)-automation and to leverage data for insights towards more effective decision-making. Despite inevitable hurdles (e.g. administrative burden, policy restrictions, technologies not yet proved, costs, integration of emerging technologies within established environment, organizational alignment, non-financial resources constraints, technologies skills set of employees…), the aim must be to accelerate the pace of transformation.

So what does this mean for CFOs and treasurers?

Given these observations, one might well ask why smaller structures and less professional treasuries aren't planning to take a leap of faith to catch up? It's also regrettable that, while account virtualization and in-house banking technologies are emerging, there aren't more companies “professionalizing” their treasuries? Leadership must come from the top, but also from the treasurer himself. Leadership means proactivity and the desire to move forward. As technology provides an opportunity to review procedures and policies when it is implemented, companies that are “ahead of the curve” in terms of technology applied to treasury also excel in this respect. Technology and innovation are therefore a means, an opportunity and an end in themselves. It's a never-ending, virtuous quest. Adopting and integrating treasury technology drives the greatest improvement in overall treasury performances. By corollary, treasury underperformances in other areas can be linked to technology underinvestment. Let's remember that technological innovation, hyper-automation and centralization are signs of better financial health, and that they call for success. So don't wait any longer to follow in the footsteps of the leaders....

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Fran?ois Masquelier, CEO of Simply Treasury – January 2025 - Luxembourg