How can treasurers transform to realize new value in a world of uncertainty?

Creating a cash-focused culture

When treasurers successfully unlock operating cash and improve liquidity, they can create new value by freeing up funding for vital investments or reducing new debt. They can also collaborate with commercial and finance teams to unlock working capital from purchase-to-pay and order-to-cash processes.

Greg Russo, Principal, Financial Accounting Advisory Services at Ernst & Young LLP, believes that the treasurer will increasingly be seen as a free cash flow manager in future. “Free cash flow is critical,” he says. “Investors focus on it because it’s the money that organizations use to invest in new projects, pay down debt, buy back stock and pay dividends. If treasurers can help to free up cash flow through their day-to-day cash management processes, they can create immense value for their organization.”

Treasurers recognize that building a cash-focused culture can support value creation. Optimizing liquidity is the second most cited way treasurers can add value, with 29% of treasurers surveyed and 26% of CFOs noting its importance. Among the surveyed treasurers, 29% say they have full personal responsibility for working capital and free cash flow, rising to 42% for transformative treasurers.

However, some treasurers can struggle with visibility into operating cash. Only 17% of treasurers surveyed report having complete near real-time visibility, with transformative treasurers being 70% more likely to achieve this.

Technological innovation can potentially increase treasurers’ ability to create value through cash management. Systems-related challenges are significant barriers to achieving near real-time visibility, with 26% of treasurers citing a lack of technology to aggregate financial data.

Recommendations

To build resilience through financial risk and cash management, treasurers should:

1. Challenge the business to rethink its cash culture by improving operational cash management, renegotiating payment terms and assessing inventory and tax strategies.
2. Undertake major financial risk management activities such as scenario planning and financial stress testing to boost financial resilience.
3. Get involved in the organization’s end-to-end processes, from sales to accounting, to better manage cash and mitigate financial risk.

Treasurers and CFOs agree that the most important way in which treasury adds value to the enterprise is by leveraging data and technology to drive organizational financial agility (cited by 30% of treasurers and 35% of CFOs surveyed). Transformational treasurers are even more likely to believe this (43%), suggesting they already heavily exploit technological tools in their work. 

This emphasis on data and technology highlights the importance of financial agility to organizational success. As custodians of important organizational data, finance is uniquely positioned to lead digital transformation. When treasurers embrace technology transformation, they are supporting their organization’s broader finance transformation agenda.

Treasurers are enthusiastic about technology, with 82% frequently using data analytics and visualization tools, rising to 97% of transformative treasurers. Similarly, 82% use cloud-based accounting software and 83% use treasury management systems. 

The research highlights the opportunities artificial intelligence (AI) presents for cash forecasting. Two-thirds (65%) of treasurers surveyed report not having highly accurate 12-month forecasts. However, 42% of treasurers surveyed who very frequently use AI or machine learning (ML) for forecasting report high accuracy, compared with 35% of all treasurers. A similar trend is seen in 13-week forecasts (45% vs. 35% of all treasurers).

Accurate forecasts can help treasurers to make informed decisions about cash allocation, optimize liquidity and enhance overall financial agility. By leveraging AI-driven insights, treasurers can better support their organizations in navigating uncertainty and planning for expenditures.

Data as an enabler

Four out of five treasurers surveyed (81%) believe that using data insights to recommend strategic opportunities is an important element of innovation for their role. Advanced analytics tools can support them identify opportunities for cash optimization and better manage market and credit risk.  

Unfortunately, many treasuries’ face challenges in deploying AI and analytics tools due to a lack of access to, high-quality data. Nearly one-quarter (22%) of treasurers surveyed cite inconsistent data across systems as a major barrier to cash visibility. 

Innovation imperative

In today’s rapidly evolving business landscape, innovation is essential for treasurers aiming to create value. They can innovate by applying analytics to new data sets, establishing new methods of reporting and consolidating bank relationships. Yet, only 25% of treasurers surveyed believe treasury fosters a culture of innovation within the finance function. 

CFOs expect treasurers to be innovators, with 47% of CFOs surveyed emphasizing the importance of treasurers leading innovation strategies for business growth. However, many treasurers face barriers to innovation, with around half reporting insufficient opportunities, people or resources to innovate. 

Outsourcing can enhance treasury innovation by freeing up  time for in-depth data analysis and strategic decision-making. Advanced analytics and modeling, as well as accounts payable and receivable, are the most likely activities to be fully outsourced (cited by 17% of responders). The greatest benefits of outsourcing include improved business experience (47%), increased automation (43%), access to specialist knowledge and skills (41%) and more time for strategic activities (41%).

Recommendations

To harness the transformative power of data and technology, treasurers should:

1. Encourage a culture of innovation by dedicating time to discuss it in leadership meetings and explore opportunities to integrate advanced technology and data into treasury activities.
2. Enhance data quality to drive business action by engaging in initiatives that aim to improve data standards.
3. Seek outside perspectives from external consultants, peer organizations and sector networks, or by attending conferences and other events.

A best-in-class treasury team understands the organization, its people, its processes and data. It leverages technological tools, including AI and data analytics to streamline operations and generate insights, while collaborating with others to achieve desired outcomes.

Treasurers and CFOs agree that one of the top ways treasury adds value is by developing finance talent through best-in-class treasury experiences. One-quarter (26%) of both treasurers and CFOs surveyed cite talent development as one of the principal ways that treasurers can add value to their organization. 

More than two-thirds (70%) of treasurers surveyed engage in team building, mentoring and career development, outperforming financial controllers (35%). Furthermore, 70% of treasurers surveyed say they always or frequently engage in developing digital and analytical skills within the treasury team. 

Although treasurers are being proactive about developing talent, there is room for improvement. Forty-nine percent of respondents believe increased training and development can enhance cash management processes, but only 27% are currently doing this. Transformative treasurers lead the way, with 48% incorporating training on technology tools. 

Collaboration opportunities

Collaboration offers treasurers important opportunities to create value. They can work with the C-suite on project financing, investor relations and M&A. However, fewer than half (43%) of treasurers surveyed report extensive collaboration with their organization’s C-suite, although this rises to 56% for transformative treasurers.

Treasurers should also collaborate effectively with peers in other functions. More than one-third (35%) of treasurers surveyed believe their role will increasingly emphasize collaboration with peers and leadership over the next five years. 

Reaching for the top

Treasurers are ambitious, with 40% aspiring to hold the CFO role in the future, rising to 54% for transformative treasurers. Nearly three in five CFOs surveyed (59%) believe the CFO role should be the ultimate career ambition for a treasurer, with 14% saying they should aim for the CEO’s job.

To achieve their career goals, treasurers need organizational support. The top areas where they seek additional support include using data for strategic insights (38%), fostering innovation and creativity (28%), and improving communication and networking skills (27%). CFOs are more likely than treasurers to believe that support for leadership skills is necessary (28% vs. 18%).

Recommendations

To nurture talent and drive collaboration, treasurers should:

1. Conduct a skills audit to identify gaps in their treasury team and create a development plan.
2. Seek feedback from the CFO on their leadership style and personal brand to improve engagement with other functions.
3. Collaborate extensively on projects with the C-suite and other senior leaders to establish treasury as a true business partner.

To drive future organizational success, treasurers should be proactive value creators who support transformation and meet CFO expectations.

This is how treasurers can realize their full potential: 

1. Becoming a transformative treasurer
2. Driving growth through impactful corporate initiatives
3. Leading on technology adoption within the finance function
4. Support your organization’s sustainability strategy
5. Establish treasury as the ultimate business partner

CFOs can empower their treasurers to fulfill their potential as value creators by:

1. Setting a strategic vision for treasury
2. Engage treasury with commercial and strategic decisions
3. Including the treasury function in the wider transformation journey 
4. Support your treasurer to enhance their value-creating capabilities
5. Raise the visibility of treasury at board level

The EY Global DNA of the Treasurer Survey provides insights into how treasurers can become proactive value creators and offers practical advice for senior finance leaders to elevate their treasury teams. Part of the CFO Imperative Series, these insights are designed to help treasurers and finance leaders shape the future of finance with confidence.