Treasurers Understand — But Aren’t Living Up To — Rising CFO Expectations

Treasurers and chief financial officers may both have their sights set on corporate coffers, but their roles are not one and the same. Still, collaboration is increasingly important between the treasurer and CFO, as each position enters a more strategic stage within the enterprise.

A new report from treasury management technology firm Kyriba and CFO Research Services offered CFOs a chance to lay out their wish lists for their treasurer peers, with chief financial officers pushing the treasury function to embrace a more prominent role. According to CFO Publishing’s Director of Research and Custom Content Christopher Schmidt, the results are surprising, and may act as a wake-up call to treasurers who believe they’re already pushing for progress.

“The results are surprising because treasurers typically set very high standards for themselves and the treasury function,” he stated. “To me, this is a sign that many treasury functions face organizational and technological impediments that are preventing them from delivering the highest value.”

The challenge for treasurers to live up to CFO expectations comes at a time when organizations are expecting both positions to step up their ability to play more strategic roles. Research from Deloitte, published last year in its Global Corporate Treasury Survey, found 80 percent of treasurers agree it is important to be a strategic advisor to their firms, with 77 percent acknowledging the importance of acting as a partner that adds value for their CFOs.

Separate analysis from the Association for Financial Professionals (AFP), also released last year, further emphasized the shifting role of treasury, with 80 percent of treasurers surveyed agreeing that the position is playing a more strategic role than it did three years ago  and will continue to do so moving forward.

There are three key areas of improvement that CFOs told Kyriba they would like to see among their organizations’ treasury teams: enhanced risk management, cash management and working capital management. The AFP’s 2017 analysis similarly found risk to be a key driver of the changing role of treasurers, with nearly three quarters of treasurers saying senior management’s focus on liquidity and risk exposure is a main factor in their position, with cash management and forecasting also top focuses for their roles in the next three years.

While the AFP’s report suggests that treasurers understand their expectations, Kyriba’s analysis found that, of the more than 150 senior financial executives surveyed, nearly half ranked their firms’ treasury departments as merely average with less than 10 percent ranking their treasury units as best-in-class.

According to researchers, CFOs are also looking for treasurers to accelerate their adoption of technologies in cash management, data visualization and reporting, and payments management. These professionals are most concerned about unreliable cash flow forecasts, the inability to optimize working capital, and the increasing risk of payments fraud faced by their organizations.

The findings echo Deloitte’s, which similarly found that the majority of corporate treasurers are not actively monitoring key risks or conducting sensitivity analysis.

As Schmidt noted, treasury departments may be falling short of CFOs’ expectations and demands, but not for lack of treasurers’ efforts. Researchers found that CFOs are aware that treasurers face key hurdles in meeting these goals, thanks to a lack of adequate technology that can get them there, as well as a lack of standardization in how working capital is managed.

According to Impact Venture Capital General Partner Eric Ball, a former CFO and former Oracle Senior Vice President and Treasurer, there may be a bit of misalignment in CFOs’ expectations for treasurers versus what treasurers’ operations actually entail.

“One challenge for treasurers is that a large part of their activities and focus are transaction-oriented, and so the CFO may not feel like they are getting a lot of strategic insight from treasury,” he said in a statement. “Better data visualization and reporting of key treasury metrics is one initiative that can help the CFO better understand the value of treasury in a time-efficient manner, and also enable that CFO to make faster global business decisions.”

According to Deloitte, it’s important that the treasury teams are proactive in ensuring they can operate as the strategic partners that their CFOs need.

“Treasury teams must continually re-evaluate their roles as catalyst, strategist, steward and operator in order to balance their priorities and challenges,” said Deloitte Risk and Financial Advisory Partner Carina Ruiz-Singh in a statement last year.