Conducting a treasury review / audit consists of documenting and benchmarking treasury processes, procedures and policies in order to create a strategic, multi-year improvement plan.   TreaSolution's treasury review consulting services has allowed us to gain extensive experience working with treasury departments in order to assist them in implementing treasury best practices.   Listed below are five reasons why a CFO / Treasurer would want to make a treasury review project a top priority.

There is a substantial learning curve for treasury department senior management (CFO, Treasurer, Assistant Treasurer, etc...) when they are new to the treasury department.  This is especially true if the treasury department senior management is also new to the company.  A treasury review / audit inherently shortens the learning curve for senior management because the treasury review will document all critical treasury processes, benchmark them against best practices and highlight both what is working well and opportunities for improvement.  What more could new treasury department leadership ask for when starting a new job?

Combining two treasury departments is a challenging process.   Combine two treasury departments while consistently implementing best practices is even more difficult!   Often there are time constraints when combining treasury operations due to mergers / acquisitions.  This often creates an environment of "just make it work" instead of "make it work well."   A treasury review after a merger / acquisition allows corporate treasurers to take a step back and critically analyze the combined treasury operations so that best practices can be implemented over time.

"It's always been done that way!" or "If it's not broken don't fix it!"  Under most situations having stable treasury personnel is a good thing!  Having stable treasury personnel is a reason for a treasury review because there are motivations for not disrupting known processes, technologies, procedures, policies, vendors, etc...   A treasury review / audit project is a catalyst to critically analyze all critical facets of the treasury department.   A treasury review project will analyze the business logic of each critical process, policy, et al. to ensure the implementation of best practices.

Has your organization outgrown your current treasury function?   Are your treasury personnel struggling with the volume & complexity of your organization's treasury management requirements.  If so, a treasury review will assist corporate treasurers in developing a successful treasury strategy that will foster secure and efficient treasury operations.   Business requirements dictate the scope of treasury operations.  Therefore, a treasury review / audit project will review all critical business requirements in order to develop a secure and effective treasury strategy.

All technology, including treasury technology, advances at an astonishing rate!   A key reason for considering a treasury review project is to help ensure that your organization is leveraging treasury technology effectively.  A treasury review will analyze the utilization of both current treasury technology (within the treasury department) and treasury technology which is available in the marketplace.   A treasury review will provide senior treasury management with a clear understanding as to how treasury technology can make a meaningful impact upon treasury operations, security and efficiency.

Ultimately, a treasury review project enables corporate treasurers to  have a thorough understanding of their treasury department operational successes, risks and opportunities.   A treasury review / audit project is a tool that successful treasurers utilize when developing a world-class treasury function. 

What road will you take to create the best possible treasury department for your organization?

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Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Best Practices Review

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As a treasury technology consultant, this is one of the most popular questions I get asked: "So, how long will it take to implement a treasury workstation from start to finish?"   The answer depends upon numerous factors such as the size of the organization, the number of people on the treasury workstation team, the scope of treasury operations, the number of financial institutions, etc...   Needless to say, TreaSolution wanted to discover some metrics around general treasury workstation implementation durations. 

This graph indicates the actual treasury workstation implementation duration (in months) for organization that purchased a treasury workstation.   Overall, the average treasury workstation implementation time was 7.51 months.   

For smaller organizations (<$250 Million in Revenue) the time to implement a treasury workstation was elevated (8.33 months) primarily because those companies typically do not yet have a treasury department.   There may be one or two people in the Controller's group who are responsible for implementing treasury technology leading to a longer implementation duration.   

For organizations between $250 Million - $5 Billion in revenue there is a reduced implementation duration (5.86 and 5.76, respectively).  Our options as to why this group is able to implement a treasury workstation more efficiently are:

1. Typically, these organization have a dedicated treasury department with knowledgeable personnel.
   
2. Generally, these organization have not yet had the need for extremely complex treasury management structures and services.
3. Many of these organizations are interested in SaaS / Hosted treasury workstations that can be setup and distributed rather quickly.

Finally, organizations that have greater than $5 Billion in revenue tend to have an extended treasury workstation implementation duration of 10.75 months.   Our opinion as to why this group has a longer treasury workstation implementation duration is:

1. Large organizations tend to have an exponential growth in treasury management complexity.
2. Large organizations generally have a larger scope of treasury management functions (FX, Insurance, Inter-Company Banking, Investor Relations, etc.).
3. Large organizations generally have more bank relationships, bank services and bank accounts.
   
   

Do you agree or disagree with this data?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Workstation Selection (RFP)
Treasury Workstation Implementation
Treasury Intelligence Reports (FI's)

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What is the tipping point?  When do large companies actually create a treasury department?  TreaSolution's research on this topic indicates that corporations typically create stand-alone treasury departments at approximately the $250 million / year revenue range ( + / - $100 Million).  There are some exceptions for smaller, truly multinational organizations.  For organizations < $250 Million / year in revenue, the treasury management function is typically conducted by someone in the Controller's department. 

Generally, there is one main reason why an organization needs to create a stand-alone treasury department = cash management complexity.   At a certain point during an organization's revenue growth, it's cash management functionality outgrows the Controller's group.  The catalyst for this increase in cash management complexity may be due to organic growth, merger(s) and/or acquisition(s).  It is at this point that it become more secure & efficient for organizations to develop a new, stand-alone treasury department.

List below are five topics that should be taken into considering when developing a new treasury department:

What is the new treasury department going to be responsible for?   Specifically, what will be the treasury department's scope of operations?  An organization may want to document their business requirements when answering these various questions.   One approach is to start at a very high level business requirements then work your way down to more specific business requirements.  Listed below is one example of a high level to detailed level business requirement logic:

Multinational Operations (US & UK) --> Cash Forecasting --> FX Risk Management --> USD / GBP Hedging

This is a simple example that should be replicated for every function that will be incorporated in the new treasury department.   Once the new treasury department's scope of operations are determined, then an organization can review the department personnel, hierarchy, technology, policies, procedures and internal controls.

Hiring qualified treasury personnel (or providing sufficient treasury management professional development) is one of the most important factors that will determine your organization's overall treasury management success.   Treasury department personnel should be familiar with current treasury best practices and internal controls.   When creating a new treasury department it is important to have someone on the treasury team who is an experienced treasury practitioner who can implement secure processes that are simultaneously efficient.  Continuous treasury department training can help ensure that your treasury department is educated on the most current treasury best practices.

Most new treasury departments will utilized a combination of bank website and spreadsheets to manage treasury operations.   The main reason for this is primarily because most organizations develop a treasury department while cash management complexity is still reasonable.   As organization grows in revenue, cash management complexity will also grow.  

In some instances, organizations postpone the development of a treasury department (respective to the organization's annual revenue and cash management complexity.)   If a relatively large organization is creating a new treasury department then bank websites and spreadsheet may not be secure and efficient enough to facility treasury operations.  In these situations, organizations may want to consider the selection and implementation of a treasury workstation (treasury management system).

Let's discuss the general definitions of treasury policies and procedures.  Treasury policies are the rules by which the treasury department will operate.   Treasury procedures are the step-by-step instructions as to how each treasury process will be conducted.  The treasury procedures will operate within the rules dictated by the treasury policies.

The development of treasury policies should be a team effort.   The CFO (via Board of Director directives) can lead in the development and approval the overall policies for the treasury department.   Specific treasury policy feedback should be requested from various subject matter experts such as Legal, Internal Audit, Accounting, IT, Treasury Consultants, etc...

The development of treasury procedures is a more specific task.   In order to create a secure and efficient treasury process one must have a detailed understanding of internal control, business requirements, treasury best practices and treasury department capacity.  Generally, treasury department procedures will be draft by the corporate treasurer and submitted to both the CFO and Internal Audit for review / approval.  Once approved, treasury procedures should be reviewed annually to ensure that they are 1.) meeting business requirements, and 2.) utilizing current treasury best practices.

Treasury internal controls are of paramount importance.   Therefore, throughout the treasury department development process an organization should always consider treasury department internal controls.  Are internal controls incorporated into the new treasury policies?  Treasury procedures?  Are there sufficient separation of duties amongst treasury personnel?  Are there sufficient separation of responsibilities amongst departments?   These questions (and more!) should be address when creating a new treasury department. 

Ultimately, the overwhelmingly vast majority of large organization will create a treasury department at some point during their revenue growth story.  The best treasury department development strategy is to be proactive and not reactive.   Treasury department formations are more complex and challenging if an organization has sufficient cash management complexity yet delays the  development of a treasury department.   

Do you agree or disagree with this article?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Best Practices Review
Treasury Benchmarking Reports 
Treasury Department Development
Treasury Workstation Selection (RFP)
Treasury Workstation Implementation

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Hiring a treasury consultant is an important decision.   A treasury consultant should be able to lead without direct authority and help ensure that a treasury project is successfully completed.  Furthermore, treasury consultants are often quasi-representatives of the treasury department during the course of a project.  Therefore, it is important to take into consideration the five issues listed below before your company hires a treasury consultant.

The treasury consulting fees will be a major (but not the only) consideration when hiring a treasury consultant.   When retaining knowledge-based professionals it's not always the best idea to hire the low-cost provider.   With that being said, treasury department's do not have an unlimited budget for treasury consultants.  Therefore, it is important to find qualified treasury consultants who's service fees will be within your project's budget.   So how does an organization determine if a treasury consultant's fee will be within budget?   There are two main steps:  1.) Communicate with the treasury consultant the project's exact requirements, and 2.) Request a proposal for services from the treasury consultant.   An experienced treasury consultant should be able to provide a fairly accurate time & consulting fee estimate based upon their past work with similar projects.

Experience. Experience. Experience.   Your treasury consultant should have extensive treasury consulting experience and experience pertaining to the particular project your organization will be pursuing.   Hiring a treasury consultant who has numerous years of treasury consulting experience (not just between jobs) and has an extensive list of past clients will be of value to most treasury departments.   An seasoned treasury consultant can leverage their experience to help ensure that your treasury project is successfully completed on-time and on-budget.

Is your treasury consultant familiar with current treasury best practices?  Does he/she know about the general functionality of other treasury departments within your industry / revenue range?  A qualified treasury consultant will have extensive information about treasury best practices and will be able to benchmark your treasury department against specific metrics.  Furthermore, you should be able to review a treasury consultant's treasury thought-leadership by reviewing their blogs, treasury articles and survey data.  

Just because a treasury consultant has past experience does not mean that they provided good treasury consulting services / advice.   An organization should review a treasury consultant's client references and testimonials to see if their past clients were satisfied with their services.   By leveraging the opinions of past treasury clients, you will be able to make a more informed treasury consultant hiring decision.

One of the most important consultant skills is often overlooked when hiring a consultant.  Did you take into consideration the treasury consultant's interpersonal skills?  A treasury consultant can face many challenges while working on a project.   Some of the challenges could be:

• Leading teams without direct authority
• Working with personnel from numerous departments
• Delivering challenging news / recommendations
• Leading treasury projects during times of elevated departmental stress
• Representing the treasury department to C-Level executives
  

Hiring a qualified treasury consultant with non-ideal interpersonal skills will most likely make these situations more challenging.   An organization can help mitigate these challenges situations by taking into consideration a treasury consultant's interpersonal skills before the project initiation.

A skill treasury consultant should be able to consistently interact with all parties on a friendly, professional and steadfast manner.  If your treasury project does encounter challenging periods, your treasury department will be able to lean on your treasury consultant's interpersonal skills and experience to guide your project through to more calm waters.

Do you agree or disagree with this article?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Best Practices Review
Treasury Benchmarking Reports 
Treasury Workstation Selection (RFP)
Treasury Workstation Implementation

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