Welcome to Treasury Insights written by Kisandka Moses, Treasury Lead, FinTech Connect
I was recently joined by Walter Cirillo, VP – Treasury at Aerosoles, John Engeman, Treasury Director at David Yurman, Yeshiva University’s Chief Treasury Officer, Michael Schreiber and Franz Gritsch, Treasurer at Rosenthal & Rosenthal to get their takes a variety of liquidity, operational and forward-thinking treasury technology matters amidst a storm of global banking regulation, macroeconomic uncertainty and advances in tech-led treasury transformation.
How far does macroeconomic activity influence day-to-day corporate treasury strategy on a ground-level and is it fair to assume that longer-term investments will have a greater role to play in prioritizing liquidity, security and yield sooner rather then later?
Michael Schreiber, Yeshiva University: Treasurers must be keenly aware of the goings on in the macro economy [for instance] Fed policy, BREXIT, risk on and risk off events; which can have a dramatic impact on currency and short term yield exposures.
Hedging your currency exposure against your sources and uses of cash and duration matching your cash needs will greatly minimize the effects of world economic events and allow your particular business to focus on its core strengths. Depending on your particular needs, prioritizing liquidity, security and yield should always be the first item on any organizations agenda.
In this current environment of negative interest rates, major risk off events and a more challenging overall regulatory framework, the above priorities have become more challenging and you need to be that much more precise with your decision making and forecasting. Understanding your banks compensating balance policies and yield alternatives are a great place to start.
“Depending on your particular needs, prioritising [liquidity, security and yield] should always play an important role in the treasury function” – Michael Schreiber, Chief Treasury Officer, Yeshiva University
Is there a difference between treasury management and cash management?
Franz Gritsch, Rosenthal & Rosenthal: Absolutely, as a finance company we need a treasury system not only to manage cash flows but also to get the best rates on borrowings. This helps to maximize our margins on loans we make.
Michael Schreiber, Yeshiva University: I believe that cash management is part of the overall treasury management function. Whereas cash forecasting, risk management and understanding of yield curves are the essential responsibilities of cash management, the treasury process must also focus on payment systems, bank relationships, debt financing, and the understanding the “guts” of how your organization functions on a daily basis and properly communicating that information in real time.
John Engeman, David Yurman: Cash management is an essential function within treasury management. The daily cash position is established and the prior day’s activity is reconciled. Bank accounts are managed to ensure appropriate balances and proper funds transfers, deposits, disbursements, etc.
Treasury management encompasses cash management, forecasting, managing debt, compliance, financial reporting, negotiation, foreign exchange, hedging, risk management, controls and policies and procedures.[However] all treasury practitioners should be experienced in cash management [as] there are additional critical skills to be gained in global treasury management.
Walter Cirillo, Aerosoles: Treasury management encompasses the management of the firm’s cash (inflows and outflows), investments, financial planning and forecasting, financial risks (FX and interest rates) and banking relationships. Cash management is a sub-category of treasury management and the focus is to manage the cash (A/R, A/P) and the liquidity of the firm, including investments, to ensure the firm has the financial resources available when it needs them.
Can an automated cash and receivables management policy starve off poor corporate growth and revenue?
Franz Gritsch, Rosenthal & Rosenthal: It would certainly be a positive to the overall corporate health. Instituting a lockbox saved us about 2 to 3 days float, and the data files that we receive from our bank allows us to auto apply about half of our payments thus saving labour costs.
Michael Schreiber, Yeshiva University: I don’t believe automating in a vacuum helps, but rather needs to be used in the framework of proper forecasting and understanding risk and liquidity needs of your particular organization. If the automation is used properly, in the context of solid cash forecasting and risk management, then this tool is essential in helping any corporation through difficult times.
What is the real day-to-day value gained from implementing a treasury management system?
Franz Gritsch, Rosenthal & Rosenthal: I deal with over 30 banks, with receiving deposits, making payments and borrowing from each bank, a treasury system is critical to staying on top of your cash positions and making the most efficient use of cash flows. No matter how much technology you have, you still need human contact to maintain a healthy relationship with banks and I speak to many of my banks either on a weekly or monthly basis.
“No matter how much technology you have, you still need human contact to maintain a healthy relationship with banks” – Franz Gritsch, Treasurer, Rosenthal & Rosenthal
John Engeman, David Yurman: A treasury management system provides the real time global visibility and accuracy needed to make effective, informed decisions to better manage treasury and the business. A treasurer partners with the business to manage risk, capital and liquidity.
Knowing the global cash position by currency and entity, combined with the investments and debt portfolios and dynamic cash and debt forecast, the treasurer has the necessary tools to act strategically and proactively. The treasurer and treasury organization can focus on strategic initiatives and make timely, effective decisions, rather than spend time gathering information and entering into spreadsheets and documents risking errors and wasting resources.
“A treasurer partners with the business to manage risk, capital and liquidity” – John Engeman, Treasury Director, David Yurman
Walter Cirillo, Aerosoles: Treasury departments are tasked with protecting the assets of the corporation from various risks and at the core of their business function is the management of cash, financial risks (FX and interest rates), investments and banking relationships.
The implementation of a TMS provides companies many benefits such as: global risk visibility which allows for more effective and efficient hedging strategies, cash visibility which provides better cash forecasts, investment decisions and efficient funding opportunities and workflow automation with secure and efficient straight through processing of treasury processes.[Additionally TMS provides] integration with ERP systems, banking platforms and FX dealing platforms which reduce errors and improve process efficiency and accuracy, cyber security which reduces risks and fraud, improved compliance as global rules and regulations become more complex, improved treasury resource utilization and process improvements by freeing treasury personnel from performing manual processes and allowing them to perform value added (strategic and analytical) tasks. [From an operational aspect TMS also] supports corporate growth as companies expand globally and the need for a centralized treasury increases which will allow firms to provide subsidiaries the necessary treasury services and support. A TMS can prove to be a cost effective treasury automation solution which will reduce operational risks and errors and improve the speed and quality of treasury reporting.
“A TMS can prove to be a cost effective treasury automation solution which will reduce operational risk and errors” – Walter Cirillo, Vice President – Treasury, Aerosoles
Can you describe what the term ‘treasury transformation’ would look like to you?
Franz Gritsch, Rosenthal & Rosenthal: 15 years ago my company did everything manually. We received live checks, applied them manually and borrowed from banks manually. Now I have lockboxes, a treasury management system, and state of the art loan system, the only thing I still do manually is bank borrowings.
Michael Schreiber, Yeshiva University: Treasury transformation is all about understanding how commerce will be transacted in the future and staying ahead and/or ready for change as it is both needed and advantageous for your organization. The age of digital payment systems, smart phones, currency alternatives and the future of generic banking are all imperative components of defining how your treasury department will be transformed.
See all four speakers in action at the Cash and Liquidity Optimization USA Conference – 13th & 14th September at the New York Marriot Marquis.
If you would like to find out how to attend, please visit www.cashandliquidityamericas.com.