Taking A More Temperate Approach To Treasury Transformation

Cryptocurrency, real-time payments and more transparent cross-border transaction capabilities are igniting buzz in corporate treasury departments as finance leaders ponder the impact of emerging innovations. The potential implications for the way treasurers make payments, move money and apply cash are vast, and have created excitement and buzz around these technologies.

But the reality of today’s corporate treasury department may bring pause to some corporate FinTech innovators eager to transform the treasury department.

According to Paul LaRock, director of Treasury Strategies, a division of Novantas, treasury departments in 2021 are less eager to overhaul their payment operations through cryptocurrency and instead are simply continuing their effort of migrating away from paper checks.

“It surprises me that in 2021, we’re still having this discussion,” he told PYMNTS in an interview.

Yet the continued use of paper remains a major roadblock to corporate treasurers interested in embracing innovations that could transform the way they operate and bring value to the enterprise. As LaRock explained, the migration away from checks may be an old, seemingly never-ending story, but it continues to drive changes in the way treasurers think about their strategic role within their organizations.

The Stubbornness of Checks

Despite accelerating corporate payments technological innovation, B2B payments continue to drive a significant volume of check transactions in the U.S. Among the largest reasons, said LaRock, is the stubborn inertia of legacy workflows within the enterprise.

“It’s a conversion issue,” he explained. “Corporates have to allocate the resources, the people, the time. They have to call vendors, get bank account data, set up ACH payments in their systems. It’s easy, but it’s tedious and takes a lot of time.”

There are tried-and-true strategies to shift the needle toward greater ACH and card volume in the treasury department, however. With many businesses experiencing supplier turnover of up to 25 percent each year, onboarding new vendors and establishing electronic payment agreements at the get-go can make an effective dent in a company’s check volumes.

But as the paper check conversation continues, corporate treasurers have also expanded their view of what it means to transform payment operations. It’s not simply about migrating from paper check to ACH, noted LaRock, it’s also about bringing greater efficiency to the entire payments value chain, from invoicing through to receivables allocation.

As a result, treasurers are also placing greater weight on driving invoice digitization, enhancing the movement of data along with transaction, and driving automation not just within the treasury department, but throughout other areas like payroll, accounts payable (AP) and accounts receivable (AR). After all, he said, a customer that has been migrated to ACH won’t deliver much value to the enterprise if it pays a company without accompanying information about invoice that payment is for.

Expanding the Role

Treasurers are looking beyond their own treasury departments in other ways, too.

These professionals are positioning themselves close to the IT department, for instance, a necessary evolution as more corporates face a growing threat of cyberattacks. (Ransomware payments, LaRock noted, are often the only scenario in which treasurers find the need to use cryptocurrency.)

They’re also exploring ways to drive value for their organizations beyond the traditional functions of the treasury department.

“Treasury is more than just positioning and payments,” said LaRock. “It’s also the management of expenses in the whole value chain of treasury and non-treasury activities.”

That recognition led Treasury Strategies to strike a collaboration with GTreasury in an initiative that sees Treasury Strategies integrating its bank fee analysis within the GTreasury platform. Managing and benchmarking bank fees is one example of a workflow that has the potential to positively impact a company’s profit and loss (P&L) statement.

“If you combine excellence in liquidity management with excellence in managing fees, now you’re really showing to other departments you can be a contributor to the bottom line,” he noted.

Embracing the opportunity to collaborate across departments and make meaningful impacts within broader value chains remain a challenge for corporate treasurers looking to become more than simply “balance sheet treasurers” and embrace an operational role within their firms. And whether it’s migrating the payment value chain away from checks and toward electronic automation, or identifying opportunities to lower bank fees, treasurers face plenty of inertia that can stifle change and progress.

But the treasury department continues to press forward, noted LaRock, and while they may not yet be positioned to overhaul operations through exciting technologies like cryptocurrency, they can make meaningful changes for their organizations.

“They want to take the tools they have and be able to use them more efficiently,” he said. “They struggle year after year to continue that march towards efficiency.”