Survey Reveals High Levels of Inefficiency Within Internal Treasury Operations

The gtnews survey1 highlighted a number of significant trends in the way internal treasury operations are managed and function within corporate organizations. For instance, a high proportion of corporate respondents are still using manual methods, such as spreadsheets and e-mails, to send data between subsidiaries and treasury while less than half of them are happy with the timeliness and accuracy of the data treasury receives. The lack of automation across all data processes is reflected by the fact that a mere 9% of corporate respondents said that were ‘fully automated’ in the transmission of data and only 4% have a ‘fully automated’ process in place for the consolidation of data.

Why are manual processes still so predominant in internal treasury operations? What are the barriers to process improvement and how can they be overcome? This article considers these questions with reference to the survey results.

Dissatisfaction with Data Supplied by Subsidiaries

Sixty-two per cent of the corporate respondents said their subsidiaries had adequate data but that it is held in multiple systems and formats. Almost one fifth said that their subsidiaries held poor or insufficient data while 21% said they had good data that was readily accessible.

Which of the following options best describes the data held at your subsidiaries?

The survey results indicate that the information treasury needs to do its job is difficult to collect from subsidiaries and this is due to a number of reasons. One problem is that there is a lack a motivation among subsidiaries to collect and send data because they don’t necessarily see why it is important to provide the best available data for treasury.

“In my experience, subsidiaries don’t understand the role of treasury and why they need to inform treasury about how much cash they have or give treasury an accurate cash forecast, for example,” explains Timo Hämäläinen, CEO of Exidio. “They think of the cash as ‘their money’ and don’t grasp why treasury would be interested in their figures.”

Treasury should have company-wide knowledge of finances and therefore a company-wide view of cash held at all operating units, which requires co-operation and information from subsidiaries. In order to do this, more education and better communication between treasury and subsidiaries is needed. It is also crucial that treasury has clear management support in order to enforce its requests for data from subsidiaries.

Another factor behind the overall dissatisfaction with the quality and accessibility of data is that subsidiaries might not have the resources and time to collect and report information due to the lack of automation across the relevant processes.

The survey results show that manual processes are still dominant in the transmission of data, which affects both accuracy and timeliness, as manual processes are more prone to error compared to automated operations and also take much more time and effort on the part of employees. As a result of manual processes, subsidiaries can also find it difficult to collect data because of limitations within their legacy systems and a lack of integration between systems.

Manual Processes Dominate

According to the gtnews survey, communication between subsidiaries and treasury is still executed by e-mails, fax and spreadsheets for 43% of the corporate respondents. Forty-eight per cent say that this process is partially automated, which probably refers to spreadsheets and e-mails combined with macros or upload functionalities, such as FTP transfers.

Which of the following options best describes the method of transmitting data between subsidiaries and central treasury?

Aside from the fact that manual processes are less accurate and more prone to error, Exidio’s Hämäläinen also points out that by using spreadsheets and e-mails corporates do not create a tangible audit trail. This is a real cause for concern because audit trails are an important requirement of corporate governance requirements under Sarbanes-Oxley, for example.

“With currency exposures and the application of hedge accounting, companies need to have a better solution than spreadsheets to show auditors that they have a linkage between the underlying exposure and the hedge,” advises Hämäläinen. “IAS 39/FAS133 are significant reasons why corporates need to stop using spreadsheets.”

The inefficiency of manual methods is demonstrated by the fact that 51% of corporate respondents said they were not satisfied with the timeliness and accuracy of the data they receive from subsidiaries and operating units. This is not surprising to Hämäläinen who says that this is the usual result of the ‘garbage in, garbage out’ phenomenon.

In Western Europe, a higher proportion of corporate respondents are satisfied with the accuracy and timeliness of data (57%) compared to 46% in North America, 24% in the Middle East and Africa and 24% in Asia Pacific. Interestingly, across the range of revenue brackets, the highest proportion of corporates that are satisfied with the data they receive have revenues of less than US$10m; while among those with revenues of more than US$10bn only 44% say they are satisfied. This could be attributed to the fact that a company with higher revenues is likely to have more subsidiaries and therefore greater challenges in terms of communication.

Lack of Integration

Only 4% of corporate respondents said they are fully automated in the consolidation of their data, which must make day-to-day operations more difficult considering the fact that 62% said their data is held in multiple systems and formats. The results show that treasuries have to collect data from several places including their banks’ systems, treasury workstations and spreadsheets.

While treasury workstations include bank information using SWIFT messages to collect balances from all over the world; the challenge for corporates is collecting and consolidating commercial information (e.g. accounts receivable and order backlog) at the subsidiary level using the manual processes in place and then integrating that information with other systems.

Furthermore, if treasury needs to collect data from several places, it will also be difficult to create reports from that data. This is evident from the fact that only 6% of corporates have automated real-time/on demand reports while the majority (78%) say that this is partially or highly manual.

Priorities for Improvement

The corporate survey respondents highlighted cash forecasting and treasury reporting as the areas that are the highest priorities for improvement. Fifty-nine per cent of corporate respondents said that cash forecasting was a high priority while 42% said the same of treasury reporting (respondents were allowed to choose more than one answer).

Please rank your priorities in improving your processes in the following areas:

The importance of improving these areas is reflected by the fact that only 14% of corporate respondents said they are ‘already OK’ with cash forecasting and 18% with treasury reporting. It is these processes, in particular, that require automation and better integration and the fact that they have been highlighted as priority areas for improvement is an indication that corporates are considering how to move forward with their systems and away from spreadsheets.

Interestingly, 30% of corporate respondents said they are ‘already OK’ with both corporate governance/SOX and hedge accounting reporting (IAS39/FAS 133); while only 20% said these areas are a high priority for them. Perhaps this is a reflection that corporates are well advanced in their compliance with Sarbanes-Oxley and the international accounting standards compared to the ongoing challenge of cash forecasting and treasury reporting.

In fact, these two areas are the highest priority in terms of improvement for corporates across all regions: Asia Pacific, Central and Eastern Europe, Latin America, Middle East and Africa, North America and Western Europe, albeit to different degrees. For example, a higher proportion of corporates from Central and Eastern Europe (88%) said that cash forecasting was a high priority compared with just over half of the corporate respondents from Western Europe. In addition, a greater number of corporates from Latin America said treasury reporting is their highest priority (63%) compared to 34% of corporates from Western Europe.

A look at the other areas shows that corporate governance is a high priority for a greater proportion of corporates from the Middle East and Africa (40%) closely followed by Latin America (38%) while only 17% of corporates from North America and Western Europe say it is a high priority. Hedge accounting is also a high priority for the Middle East (30%) but only for 12% of corporates from North America.

In terms of revenues, the highest proportion of corporates that are ‘already OK’ with corporate governance and hedge accounting are in the US$1-10bn bracket. Cash forecasting and treasury reporting is a high priority for a greater proportion of corporates with revenues US$10-50m and US$1-10bn.

Barriers to Process Improvement

When asked to list the barriers to process improvement (respondents were allowed to give multiple answers), over half the corporate respondents selected overcoming organizational silos as well as insufficient resources to implement projects. This confirms the fact that many corporate organizations suffer from the lack of communication between subsidiaries and the finance and treasury departments.

Which of the following barriers to process improvement apply to your company?

“I faced the same problems when I was working in the treasury department within a multinational seven years ago. The communication between the finance and treasury departments was pretty much non-existent and the operating units clearly did not understand why they needed to provide information to treasury,” says Exidio’s Hämäläinen. “The fact that many corporates said they had insufficient resources to implement projects is probably because treasuries are still handling most of their processes manually and they are often under-staffed. The few members of treasury are fully occupied by daily operations and administration so they cannot implement new projects or improvements.”

Despite the fact that many corporates say they have insufficient resources only 23% said they had a lack of budget, which should be a positive sign for improvement. Thirty-one per cent of the corporate respondents selected lack of sponsorship from senior management as their main barrier to process improvement while 32% need more knowledge about options/approach and 40% have more pressing issues to solve.

Again, there are slight variations when we look at the results across the different regions. For instance, corporates from the Asia Pacific, Central and Eastern Europe, Latin America and the Middle East and Africa have a greater need for more information about options and approach to improvement. Corporates in North America and Western Europe are hindered by a lack of budget, a lack of sponsorship from senior management, overcoming organisational silos and other more pressing issues to solve.

In terms of revenues, for corporates with revenues less than US$10m and between US$10-500m the biggest barrier to process improvement is gaining more knowledge about options while corporates with revenues between US$500m-1bn said it is insufficient resources to implement projects. At the higher end, for corporates with revenues between US$1-10bn the barrier is lack of sponsorship from senior management and those with more than US$10bn (ironically) it is lack of budget.


In order to address the inefficiencies of internal treasury operations discussed in this article it is clear that treasuries need to automate processes to increase their time and resources for other projects, such as working with subsidiaries to increase their understanding of the treasury function and therefore ensure the timeliness and accuracy of data.

Corporates recognise cash forecasting and treasury reporting as important areas for improvement and – coupled with the fact that 77% of the corporate respondents do have a budget to improve their processes – this is a positive sign that improving the efficiency of internal processes is a priority.

1In November 2006, gtnews conducted a survey on internal treasury operations, which was answered by 252 corporate respondents. Seventy-one per cent of these respondents work within treasury. Thirteen per cent were from the Asia-Pacific, 3% from Central and Eastern Europe, 3% from Latin America, 8% from the Middle East and Africa, 31% from North America and 42% from Western Europe. Twenty-three per cent had revenues between US$10-500m, 13% between US$500m-1bn, 33% between US$1-10bn and 23% had US$10bn or more.


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