When does a company need a full-time treasurer?

When does a company need a full-time treasurer?

Often people ask when a company needs a full-time treasurer. It is a fair question, although tough to answer to. There are no indications, articles, books describing when a group should implement a treasury department. Of course, we all make treasury operations and decisions (often without naming them), whatever our size. However, it is essential to determine when time has come to have it. Treasury has become a must for company listed given high focus from investors. Treasury should be set up when it can generate value, as it has a cost. Treasury is not a part-time job done by non-treasurers given technicalities and complexities of operations. After a crisis like COVID, it is best practice to have its own treasury department and ad hoc IT tools in place.

Delicate question of the criteria that justify the need for a treasurer

I have often been confronted with this tricky question of when to implement a treasury department and how to do it. There are no hard and fast rules as to when it is necessary and when it is not. So, I would say it's a case-by-case analysis to be done with a specialized consultant. But we have tried to define some quantitative and qualitative criteria, which cumulatively or together (partially or totally) can be the signs of a real need for a treasurer. There will always be exceptions to the rule, as it is so difficult to establish. I have seen companies with a turnover of 100M EUR organized as MNC's and the opposite, companies with a turnover of almost half a billion without a dedicated treasury. Of course, the treasury is managed by someone, often manually and on spreadsheets. The same applies to TMS or IT treasury tools. Heavyweight suppliers do not respond to RFPs if the turnover is too low because they think that it is not worth it or that the cost will appear too high for the return on investment. A company can live without a treasurer up to a certain point. In some cases (see table) it is a "must". A company can function with a treasurer without a tool, even if it is not optimal in its management.

Good financial practice and prerequisites

The best practice would therefore be to have a treasury team and one or more appropriate tools. Unfortunately, perhaps because it is not clear when it should or should not be, we end up in situations where companies are not equipped or adapted to their size and therefore run risks. After the WIRECARD affair, more than ever, cash flow is essential before an IPO or a rating agency. Not demonstrating your organization would be an admission of weakness and consequent risks.

You wouldn't go on the high seas without an experienced skipper, I think. Similarly, you wouldn't navigate the financial markets without a skipper skilled in cash management/treasury. If it turns out that you have this need, then the question arises of setting up this department. It will start by hiring a treasurer who is starting from a blank sheet of paper and without a treasury culture, will feel a bit lonely. It is up to the CFO to set the tone and instill this culture. Moreover, even for MNC's with dedicated treasury, it remains mysterious, unknown, and not understood by many within the company. It will be up to the treasurer to be adopted and to make people understand its usefulness and the added value it can bring to the business. This is even more difficult when the function does not yet exist.

Criteria to determine whether a treasury function is required:

Solutions

There is no panacea. Nevertheless, we believe that one day you must start at the beginning and take the plunge. For those who are afraid of the big bath, I would advise opting for a Treasury as a Service solution to make the link between starting from a "blank sheet of paper" and from nothing and arriving at a real department worthy of the name. By using outsourcing, both as a tool and as a human resource, you can be equipped like a professional and prepare yourself smoothly for the implementation of this department by gradually establishing the contours. In my humble opinion, this is the best possible solution that I would recommend. Otherwise, you will have to hire a treasurer, train him/her, equip him/her and support him/her in order to gradually and over the course of months and years create a real treasury department like the "pro's". Nothing is impossible of course... We also see the frequent case of high growth start-ups that have to go through this process before an IPO, or of private equity funds that buy an asset from a group in order to develop it, have it listed on the stock exchange and end up selling it with a high capital gain.

Conclusions

My purpose is not to claim to give infallible criteria to know when to adopt a cash flow, but to give keys to determine it. These indications must be taken with caution, as exceptions always exist. However, when the need arises and you know that you need a treasurer, then you must act. Again, the dilemma is how to go about it. Hiring a treasurer is a good start but risky if the project is not well thought out. The “TaaS” (Treasury as a Service) or “Uberization” of the treasury solution is on the other hand, the good idea that I think should be favored to define what is needed at low cost and to experiment it at the same time.

Fran?ois Masquelier, CEO of SimplyTREASURY – June 2022 - Luxembourg

Disclaimer: This article was prepared by Fran?ois 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).