New research from Asset Benchmark Research suggests ties with regulators and even reputation are not the number one priority for corporate treasurers looking for a cash management provider.
The Asset reported news on Monday (March 5) that its initial review of chief financial officers (CFOs), part of its ongoing Treasury Review 2018 initiative, found service quality to be the number one recommendation for treasurers and CFOs when choosing a financial services provider with cash management services.
Pricing ranked as the second-most important factor, while credit relationship, reputation, geographic coverage, headquarter requirements and relationship with regulators falling into slots three through seven, respectively.
The importance CFOs and treasurers place on service quality didn’t change between small and medium-sized businesses (SMBs), mid-market firms or large enterprises, with all groups ranking this factor as their number one priority. But while SMBs and large enterprises said credit relationship was their number three priority, mid-market firms ranked this factor as fifth-most important, instead naming headquarter requirements a higher priority than SMBs and large enterprises did.
“We don’t want the bank coming to me in a year’s time and saying this product that we’ve offered you is unprofitable,” one U.S.-based treasurer explained in the survey. “There should be a win-win on both sides. The relationship can only work if both sides have some skin in the game.”
CFOs and treasurers are also increasing the number of institutions with which they bank, the report found, as 20 percent of professionals surveyed said they had increased the number of primary cash management banks they’re working with in the last year. Only 13 percent said they decreased the number of cash management solution providers with which they were working.
Researchers at Asset Benchmark also found that for the largest enterprises, this trend is more dramatic — 30 percent of CFOs at these firms reported an increase in banking relationships, while also not decreasing the number of FIs with which they were working.
More than a quarter of mid-market firms, meanwhile, decreased the number of banks with which they’re engaging. More than 20 percent of small- and medium-sized enterprises said they increased their number of banking relationships.
“In part,” said The Asset, “this may be because smaller companies tend to face tighter financing conditions and higher interest rates than mid-caps or large corporates, making the credit relationship more important.”
In the survey, one treasurer wrote that “it’s important we have available credit and credit facilities in place to facilitate our business,” further underscoring this hypothesis.
Separate research released last year by the Association for Financial Professionals (AFP) highlighted corporate treasurers’ and CFOs’ shifting roles within the enterprise. The AFP, along with Marsh & McLennan Cos., surveyed 344 senior-level executives and found the majority agreeD that the corporate treasurer today holds a greater role in the enterprise than they did three years ago.
More than two-thirds highlighted the importance of liquidity management, and nearly half said financial metric monitoring has become a more important job for treasurers.
Two-thirds also said they believe cash management and cash forecasting will become more important over the next three years, especially as CFOs and treasurers are pressured to manage geopolitical risks, currency risks, supply chain risks and more.
“With increased scrutiny on treasury, organizations have metrics in place to measure the success of the function’s performance,” said the AFP and Marsh & McLennan in their report. “As treasurers lead and manage their team, they need to ensure the metrics implemented tie back to the vision and goals of the organization and there is complete clarity for the team with no gray areas. Treasury leaders should not assume that others are connecting the dots and reading between the lines.”