For almost four decades, companies in the treasury management industry have followed a very similar approach to business: to provide customers with cash management products as an extension of credit services. Bankers focused on products that improved transparency and added controls. Conversations between banks and customers primarily centred on products needed, and customers traditionally viewed their bank more as a vendor. All of these attributes are considered part of an era in the financial services industry that Treasury Strategies, a treasury consulting firm, has referred to as ‘Treasury 2.0’.
During this time, customers viewed their bank as the provider of credit, a loan, an investment platform, but not as the source of comprehensive treasury management expertise and broad solutions. Banks that lived in this Treasury 2.0 world were excluded from larger strategic decisions that impacted the long-term operational growth of their customers’ organisations.
While some of this narrow activity still takes place today, a transformation has been under way since 2007. A new global and technologically advanced business climate has called for a more consultative approach to treasury management. Companies no longer require just a product vendor for banking and financial services.
The changing global economy in recent years has opened up new opportunities for banks to provide a consultative approach to addressing their customers’ needs. To respond to these challenges and opportunities, banks have shifted the focus of their treasury operations to providing integrated, holistic solutions for customers. Treasury Strategies has identified this next generation of the business as ‘Treasury 3.0’ and has outlined how those banks that invest in and deliver enhanced advice and holistic solutions will achieve significant growth opportunities.
As part of this evolution, banks that subscribe to a Treasury 3.0 approach focus on listening to customers’ overall business needs. Bankers committed to this consultative approach ask customers: “What are your company’s challenges and long-term growth plans?” By engaging in these strategic conversations, treasury management professionals gain insight into the financial needs and potential risks facing an organisation.
As businesses search for ways to grow despite a slowly recovering global economy, they have the opportunity to draw in their banking professionals as strategic advisors to the organisation’s overall financial strategy. By being at the table with business leaders during high-level strategic decisions, treasury management professionals can lead discussions in risk mitigation, whether it is helping to prevent fraud or implementing a foreign exchange (FX) risk management programme. Bankers can also potentially help customers improve supply chain processes, guide global transactions and increase data intelligence. The goal of treasury management professionals today is to provide strategic advice and investment decisions for businesses to help the organisation evolve and grow in the midst of changing economic conditions.
How Will this Transformation Happen?
Leaders at banks are looking for new ways to tailor solutions to meet changing customer needs. This can come from integrated payment and liquidity solutions, efficient working capital strategies, improved supply chain financing and innovative leadership.
As part of this transformation, banks will help integrate working capital strategies, including optimising accounts payables (A/P) and receivables (A/R), alongside liquidity solutions for their customers. Streamlining these aspects of a company’s financial structure can help improve performance, optimise cash flow and open the door for greater innovation in electronic payments and solutions that help clients rapidly identify and address receivable posting exceptions.
Seamless integrated systems guided by financial advisors can also help improve supply chain financing (SCF) for global organisations. Banks can assess ways to help reduce costs for goods purchased, reduce working capital requirements, develop a more stabilised supply base and work with organisations to help them foster stronger and more reliable buyer-seller relationships.
Through this integrated approach, companies will begin to see the value of involving their banks earlier in the process when making important, strategic decisions. Instead of placing a call simply to discuss a loan or a line of credit after a business decision has been made, customers are seeking the counsel of banking professionals as they initially evaluate a business opportunity. In today’s fast-paced business climate, market conditions are in flux, currencies continually fluctuate and new financial risks are developing. By having a knowledgeable resource available for decision support and advice, businesses are better prepared to navigate through a recovering global economy.
As these industry changes occur, businesses will benefit from a more holistic banking experience. This shift in the treasury management value proposition will continue to enhance the strategic relationship between companies and their trusted banking advisor, mutually benefitting both parties as the organisation grows and succeeds.
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