What is treasury management? The complete guide

Treasury managers of global businesses are facing a unique challenge. In the face of changing economic conditions, they are under increasing pressure to ensure the financial health of the business and provide on-the-spot and accurate insights to the CFO. Unfortunately, most organizations' financial operations infrastructure is not suited for this sort of cross-border and agile treasury management. This is where Unified Treasury Management comes in to change the way treasury management is done and transform it into a strategic function within the business.

In this article we will explore what Unified Treasury is, its benefits related to cash visibility, centralized banking and in the long term, financial stability and proactive-decision making, especially when compared to traditional solutions. We will also discuss the key features to look for when choosing your Treasury Management System provider.

Treasury managers in global businesses are navigating a complex landscape. With shifting economic conditions, they are now tasked with ensuring the financial stability of their businesses and providing real-time, accurate insights to the CFO. However, the financial operations set up of many fails to handle the demands of agile, cross-border treasury management. Unified Treasury Management is poised to revolutionised this space, transforming treasury management into a strategic business function.

In this article, we will delve into what Unified Treasury Management is and its advantages, such as enhanced cash visibility, centralised banking, and how it aids the long-term financial stability through proactive decision-making, especially compared to traditional methods. Additionally, we will highlight the essential features organisations should consider when selecting a Treasury Management System provider.

International, growing businesses face similar challenges. As they grow, apart from opening subsidiaries with their own teams and budgets, they may also need to open bank accounts in different geographical locations in order to hold, send, and receive funds in the countries where they operate.

With financial information being scattered and disjointed across different financial institutions, managing treasury becomes time-consuming and difficult task. As a result, there is little visibility of the accurate cash flow and cash position and multiple blind spots - all contributing to a significant manual workload to unify the data in spreadsheets, poor control of company assets, slow decision-making, and a risk to business continuity.

This is where Unified Treasury Management, also known as Treasury Management System (TMS) or Treasury Management Software comes in. TMS is a comprehensive financial solution designed to streamline and optimize various Treasury and cash management operations. It integrates various financial and operational activities, including cash management, payments, liquidity management, risk mitigation, and financial reporting. This provides a centralized platform for effective financial control and decision-making.

With unified Treasury Management, treasury managers can streamline their day-to-day work and benefit the business in a variety of ways:

Visibility: A holistic view of cash positions across the entire business, all currencies and financial institutions.

Control: Enhanced control over cash flow and spending.

Confidence: The ability to rely on accurate data for insight, forecasting and planning.

Stability: Protection of assets in the face of volatile markets and the capability to manage unexpected financial situations, ensuring business continuity.

Flexibility: The capacity to plan beyond the short term and adapt to market shifts.

Speed: The ability to make quick decisions to seize market opportunities.

The Unified Treasury Management system is not just a tool, it brings tangible results. According to a recent survey of finance professionals conducted by the Global Treasury Benchmarking group:

95% of respondents reported that unified treasury management improved their organization's cash visibility.

90% found that it led to better decision-making in volatile markets.

85% credited unified treasury management with reducing banking-related costs.

Complete visibility of cash positions is the bedrock of successful treasury management. Multiple and outdated systems prevent many global businesses from getting a real-time picture of cash positions and spending data across the entire organization. Due to a delayed identification of available cash, many opportunities are lost, and in the worst-case scenario, business continuity may be at risk.

A perfect example of this was the beginning of the pandemic. Cross-border businesses were concerned with ensuring smooth operations despite disruptions, lockdowns and staff shortages; however, lack of global visibility into cash across all entities prevented them from timely distribution of funds to where they were most needed.

A unified Treasury Management system aggregates and synchronizes financial information from a variety of sources, spanning multiple currencies, entities, and financial institutions. This consolidation eliminates the need to hop between different systems and spreadsheets, streamlining your financial data into a singular, comprehensive dashboard with a bird's-eye view of cash positions.

But centralization isn't just about convenience; it's about control. Centralized financial data provides a comprehensive insight into payments, embracing both accounts receivable (AR) and accounts payable (AP) capabilities. This holistic view allows for better cash flow management. No longer do you need to juggle between systems to see what's owed and what's due – it's all available in one place.

With a centralized dashboard you also gain real-time visibility - the ability to see the status of your cash positions across all your businesses and funds, including cash outflows and inflows, at any given moment. One of the critical advantages is the ability to swiftly and seamlessly transfer funds between your subsidiaries or capitalize on favourable FX rates or early payment discounts.

A Treasury Manager must navigate the turbulent waters of modern economic markets. Interest rates are rising, the foreign exchange market is unstable, inflation is on the rise, and political conflicts further fuel the situation. Additionally, there is a growing distrust of fintechs following recent failures of Volt Bank and SVB, and a reluctance to deal with traditional banks. These factors combine to present treasury managers with the challenging task of ensuring long-term and short-term business health. Unified Treasury makes this easier.

Long-term financial health of the business depends on diversifying liquidity risks. This strategy acts as a safety net, providing stability and resilience in the face of potential financial disruptions. With access to multiple financial institutions and currencies in one place, a TMS streamlines the process of spreading financial assets across different currencies and accounts. With that you reduce your company’s dependence on a single source of liquidity, thus mitigating the risk of sudden cash shortages.

Furthermore, a Unified TMS allows you to maintain local bank accounts and seamlessly transfer funds between your accounts at a favourable rate, minimizing foreign currency exposure. You will also find that most Treasury Management Systems have built-in notifications and controls to help you mitigate risks and prevent fraud.

CFOs and treasury managers face enormous pressure in today's dynamic markets. To ensure business continuity and stability, they must identify potential issues before they escalate, mitigate risks proactively, and prepare forecasts and liquidity plans that consider multiple scenarios and are valid for a longer period of time. These demands depend on real-time cash visibility and the ability to analyze data quickly.

Cash visibility provided by Unified Treasury Management allows treasury managers to feel confident, no matter how volatile the markets are. With this level of transparency, you can embark on proactive liquidity planning and forecasting, turning data into actionable strategies. It's not just about staying ahead of the curve; it's about acting on the spot, optimizing liquid cash, and ensuring that the financial ship sails through even the stormiest of seas.

In order to facilitate global operations, many companies are forced to deal with multiple banking relationships. This leads to a highly decentralized banking system which often finds its makeshift solution in cumbersome spreadsheets. However, the manual data input these spreadsheets require is time-consuming and error-prone. The lack of flexibility and scalability further compounds the challenges, making it difficult for organizations to adapt to market changes swiftly.

Unified Treasury Management consolidates all banking connections into a single platform and unlocks substantial cost and operational efficiencies. Using this approach, you can open accounts and execute transactions much more quickly through unified compliance and commercial relationships. The result is a reduction in time spent on managing banking relationships and a decrease in associated fees.

Treasury Managers spend days consolidating and aggregating data and preparing reports, which is labor-intensive and error-prone. The introduction of a centralized and unified treasury management solution provides an antidote to these challenges, automating report generation and streamlining audit preparation by consolidating all reports and cash position data into a single, accessible platform.

As a result of this efficiency, Treasury Managers can redirect their efforts toward activities that contribute to business continuity and growth, such as liquidity planning, forecasting, and strategic initiatives.

Choosing the right unified treasury management provider is crucial to success. Consider the following factors when evaluating treasury management solutions:

Cash management: Look for a system that provides real-time visibility into cash positions across different banks, currencies, and all your entities. Look for features such as forecasting and liquidity management across all of your banks

Diversification: Ensure the provider offers a network of financial institutions, support for multiple currencies, and an environment where your funds are secure with the underlying operator.

Banking capabilities: Ideally the Unified Treasury provider would also equip you with integrated baking. This would mean you’d be able to easily bank and open new accounts as you grow from the same place, saving you time managing multiple banking relationships and reducing banking fees.

Scalability and Global Reach: Consider the scalability of the solution, its compatibility with cloud adoption, and its ability to provide robust customer service for business continuity.

Reporting Capabilities: Assess the reporting capabilities, including customization and automation when aggregating data from multiple sources.

Integrations and connectivity: Make sure the solution can seamlessly integrate with your existing banking relationships, workflows, and accounting tools.

Accounts Receivable (AR) and Accounts Payable (AP) Capabilities: Opt for a combined approach that provides a holistic view of cashflow.

Fyorin offers a Unified Treasury Management Solution designed to meet the needs of today's global businesses. Through our solution, your financial team can seamlessly navigate global financial operations with flexibility and speed, diversify liquidity risks for greater control, and gain a 100% view of your cash position for data-driven and proactive decision making.

Streamline Treasury Operations Efficiently - By consolidating payments, multi-banking, treasury, and reporting into one platform we simplify complex treasury operations.

Diversify Liquidity Risks across a network of financial institutions - Fyorin empowers you to spread liquidity risks across our global network of financial institutions. Easily manage liquidity diversification and safeguard your organization's financial stability.

Unify Your Financial Data for 100% visibility - With our platform, you can get a complete picture of your cash position, spending, and treasury across different entities, currencies, and banks under one roof by automatically aggregating and unifying data from multiple financial partners and sources.

Simplify Operations Across Multiple Banks - Fyorin’s portal lets you manage multiple banking relationships in one place. With us, you can easily open local bank accounts as you scale and bank globally as a local without needing to log in to multiple systems. Enjoy improved profitability by controlling foreign exchange fees and banking fees.

If you’re looking to unify your global treasury and diversify your liquidity risk get in touch with us at [email protected] to discuss how we can help you.