More
regulation and more cautious market participants. These are just two outcomes
of the financial crisis, which has in turn led to the availability of external
sources of credit to shrink. Consequently, organisations have shifted their
focus to internal funding opportunities. Cue the increasingly important role of
the Treasury function, whose primary task is to uncover hidden sources of
capital and unlock working capital.
The new mantra is simply stated: free-up
trapped cash, and diversify internal and external sources of capital to reduce
risk and cost.
In
a fast-paced global finance environment, companies have understood that
optimising their working capital provides a competitive advantage, maintains
the organisation’s health and keeps stakeholders satisfied. This translates
into increasing market demand for banks and system providers to take a holistic
approach to cash, trade and supply chain management. Why? Because the right mix
of products, combined with an advisory approach from your banking provider,
increases the efficiency of the cash conversion cycle and the entire financial
value chain.
Fit for purpose: how to re-think your treasury set up
(…) optimising working capital provides a competitive advantage, maintains the organisation’s health and keeps stakeholders satisfied.
Virtual purchase cards are becoming valid alternatives to reduce administrative costs, improve days payable outstanding, and optimise reconciliation. Simplification is a must.
effective control of financial transactions within an organisation is crucial to minimising “bubbles” of cash tied up within an organisation’s working capital. Liquidity concentration techniques (“cash pooling”) and netting of intercompany invoices are useful cash management instruments to reduce the number of transactions, and in so doing increase visibility over cash now made available for investing.
Re-thinking the financial supply chain should be a core objective of every Treasury organisation. Decisions taken by Treasury teams are increasingly influential, affecting suppliers, clients and – ultimately – the bottom line. Therefore there is a real need for awareness around financial choices and the resulting benefits for all stakeholders.
There is no “one size fits all” solution; instead, market regulations, market practices, and industry sector need to be taken into consideration. Do it right, and you create a strong “financial value chain” culture within your organisation, which will add value for your organisation.