Why Holistic Treasury Consultants are in Demand

Banks are already seeing a rising demand for a new type of treasury consultation – one that seeks to address efficiency, visibility and control throughout the entire cash management life cycle – and have begun taking steps to build this capability.

Rather than view their clients’ needs through a holistic lens, many banks remain focused on traditional product verticals. They maintain separate accounts receivable and accounts payable (AR/AP) product units, while salespeople from these units often pitch their products to companies with no real focus on how the products impact the complete cash management life cycle.

However, a couple of factors are forcing banks to move away from their focus on product silos and accept a new advisory role. The first factor is technology, which increasingly is providing greater access to more real-time, usable information.

New payment channels are emerging also. For example, a blind study of US businesses conducted by Greenwich Associates in autumn 2013 found that well over half of large middle-market businesses reported using a mobile device for at least one banking or payment service.

Expectations of the next generation

The second major factor driving the emergence of this more holistic, consultative approach to treasury management banking is the generational changing of the guard. A younger generation of treasury professionals, who grew up with technology and access to near real-time information, is ready to assume leadership. As its representatives ascend within their financial functions, the demand for more efficient, technology-based solutions in treasury can only grow.

Even now, treasury managers – particularly those from the Millennial Generation (born in the 1980s or later) – are noting the disparity between what they can do using technology in their personal financial lives and how much less they can do in their business lives. Up-and coming technology-savvy treasury managers are certain to push hard to eliminate those differences. Indeed, the Millennials stepping into influential roles in treasury show a greater appreciation – and even a demand for – banking services that take advantage of electronic processes and channels across a 360-degree view of the treasury function.

For the next generation of treasury leaders, access to timely information and the ability to make decisions based upon that information is the norm. They are more inclined to understand the value of receiving payments electronically, turning around and making disbursement decisions as well as initiating outgoing payments in the same fashion. To their way of thinking, why should they have to operate the treasury function in any other way?

In January, the US Federal Reserve Board reported that it is looking to establish a faster, electronic solution for introducing near-real time payments in both the retail and business environments. In May, the electronic payments association NACHA (previously the National Automated Clearing House Association) announced a rule change allowing enabling the same-day processing and settlement of most types of automated clearing house (ACH) payments (same-day rule).

As these types of improvements occur, an increasingly technology-powered treasury will require a different level of banking support and companies are already exhibiting a demand for it. In the recent Greenwich Associates study, nearly half of lower-end middle-market businesses (49%) and 59% of larger, middle-market businesses (59%) said they would see value in a payments consulting service provided by their primary bank.

A new kind of treasury advisor

Treasury managers are starting to look for bankers who can help them navigate their entire procure-to-pay process and apply technology across the board to operate faster, cheaper and smarter. To fulfill this new role, banks’ treasury management sales officers and/or relationship managers need to become operational advisors on managing liquidity.

What this means is that treasury management bankers need to be equipped to look at the procure-to-pay process from beginning to end. They need to visit client workplaces, talk to the treasury staff in the trenches – including those who manage accounts payable and accounts receivable – and gain an understanding of a company’s cash inflows and outflows and the processes built around them.

They need to ask numerous questions: How are you receiving funds? What does your receivables department look like? How automated is it? How are you making payments? Are you receiving payments electronically but operating your payables department in a more manual, paper-based fashion?

Treasury management bankers need to be able to conduct a new type of holistic operational review, where they ask questions such as these, in order to identify the company’s operational challenges and recommend process changes and technology solutions that will ensure automation and efficiency from invoicing to collections. Furthermore, they need to take ownership in advising treasury management clients about the impact of regulations, compliance and risk on their business.

Many regulations directly impact banks but have indirect effects on bank clients. Treasury advisors should help clients understand why the bank is changing a process or requiring a new agreement or amendment because of a new regulation. Additionally, in the area of risk, advisors need to educate clients about new fraud threats and risk mitigation solutions.

How to get there?

How do banks transform their people into the type of treasury advisors that clients now seem to want? How do they change them from product pitchers into a new type of holistic treasury consultant?

Many banks have already started by asking new questions and seeking different traits when interviewing and hiring new treasury management bankers, and by re-engineering training for those hires to better prepare them for this new consulting role.

Embracing this developing advisor/advocate role and taking the steps needed to make this transformation is a huge challenge for banks, but also offers a colossal opportunity.

It’s no secret that following the events of the past couple of decades – most notably the 2008 financial crisis – banks have taken a hit to their reputations. Responding to client demand for holistic treasury consulting services can help them regain their standing with corporate clients and reclaim their role as a trusted advisor.

314 views

Related reading