Treasury And The Evolving Role Of Cash Management

Used to be that managing a company’s liquidity and cash position was a matter of reconciling disparate bank accounts at the end of the day. The role has evolved, along with the complexities of global supply chains and doing business across multiple currencies.

In the second annual survey conducted by C2FO focused on corporate treasurers based in Europe, responses showed that 75 percent of the 100 respondents wanted to invest in technology tied to trade finance. Trade finance, they said, could help boost efficiency in cash management and supply chain (via dynamic discounting on invoices). Such efficiencies can be applied to both domestic and international transactions.

In an interview with PYMNTS, Colin Sharp, senior vice president of EMEA for C2FO, told PYMNTS that the role of the corporate treasurer has evolved from one that has traditionally been focused on liquidity and cash management to one that has increasing presence and interaction “within the boardroom itself.”

That elevated role comes as companies of all sizes must grapple with the complexities of regulation that can demand real-time insight into currency fluctuations (cited by 28 percent of respondents) and KYC mandates (cited by 32 percent of those surveyed). A low interest rate environment, said Sharp, means that treasurers must also be mindful of getting returns on assets (and cash) and, for working capital needs, may find that trade finance is a boon to operations. The lenders themselves can find better returns on their own cash by advancing it to firms via short-term lending rather than keeping that cash on the books.

The advantages of trade finance, said Sharp, extend across verticals and corporations large and small in terms of scale and geographic reach. And it’s no small market, as he said that the working capital market is worth as much as $40 trillion. More immediately, verticals such as retail and oil and gas — marked by tangible products that can offer recourse to loans — can benefit from technology-driven trade finance, he added. In addition, the volatility introduced into currency and other asset markets from events such as Brexit means that treasury functions must adopt innovative ways to deal with ripple effects that impact working capital.

Trade finance and dynamic discounting enabled through a platform that allows for suppliers to ask for early payment can help salve the restrictions on lending from banks that have come in tandem with new regulations. Among those regulations, said the executive, Basel II and other limits on lenders’ ability to part with capital mean that alternative methods are necessary. In the example of C2FO’s own offerings, suppliers look for early payment on their invoices (and buyers offer their own approved invoices) uploaded onto the online marketplace. In this case, buyers with cash to lend offer it up at terms that include rates of return acceptable to them; the suppliers set the discount rate that lines up with their own need for cash.