Against the backdrop of instability and complexity of today’s business climate, the consensus turned to level-headed stewardship of company funds and the safeguarding of capital. This is where the role of corporate treasury comes in.
Corporate treasury largely focuses on planning and managing a company’s cash flow, including the internal processes and external banking relationships that facilitate cash management. In that regard, here are four functional tasks that corporate treasury performs:
- Cash Management: The responsibility of corporate treasury to be able to manage cash as well as short-term assets to manage liabilities cannot be overstated. Thus, despite its seeming simplicity, cash management is a complex process that uses a great deal of resources and treasury intelligence. To their survival, a company must, therefore, be able to transfer long-term assets into short-term assets that can be managed and converted, with that responsibility ultimately vested in the corporate treasury department.
- Foreign Exchange: Managing the flow of funds across borders while factoring in currency fluctuations and anticipating possible future changes in foreign exchange has become more important as firms expand into foreign markets. Despite this, if the value of cash deteriorates while it crosses borders, a miscalculation with the foreign exchange can be costly.
- Investments and funding: A corporate treasury official will work closely with a company’s finance department when assessing the return-on-investment (ROI). The department will evaluate both the investment proposition and the opportunity costs of providing funding for the undertaking. Nonetheless, as the corporate treasury looks at other possibilities, it may determine that funds are more appropriate to be used elsewhere or even required to facilitate the smooth execution of day-to-day operations.
- Financial supply chain: Globally, corporate treasury departments are viewed as a company’s lifeblood because of their ability to move funds fluidly, easily, and according to the C-suite as business models and economic environments evolve. As well, while software packages help the corporate treasury departments to move funds, human interaction remains an essential part of providing a subjective assessment of financial requirements, both short and long-term.
In response, to ensure that corporate treasury departments maintain correct payment routing information, the following are a few best practices:
- Standardize and minimise manual intervention in the payment process: By using accurate and comprehensive payment routing data, and creating internal payment hubs for divisions and departments, streamline and reduce administrative burden in the payment process.
- Confirm payee bank details: When onboarding a vendor, partner, or customer, and making one-off payments to them, be sure to verify the payee bank details. This will minimize the risk of your bank master data files containing incorrect payee details, thereby optimizing payment processing efficiencies.
- Reduce the risk of payment failures: By collecting and storing accurate payment routing data, supply chains eliminate the risk of payment failures so that vendors and partners are paid on time, thus minimizing the damage to reputations and relationships.
- Enhanced control over payments routing data: Using software tools provided by a payments partner whose core competency is data management, enables corporate treasury to upload vendor, partner, and bank data directly into your ERP system’s bank master data file.
As the payments ecosystem advances at pace along with the inevitable shift towards global real-time payments, corporate treasury departments will undoubtedly encounter difficulties to ensure that payments to their vendors, partners and banks are error-free and timely. However, with ideal quality data held in bank master data files, payments can remain compliant and optimised to enable businesses to extract the best payment processing efficiencies.