What is a Treasury Transformation and how to achieve one?
Ever wondered how a business’s treasury department can metamorphose into an efficient, fully digital, and strategically aligned business partner? In the intricate maze of financial management, having a world-class treasury department could be your ticket to optimal cash flow and risk management. With this riveting journey, we’re about to take you on, you’ll find an exciting alternative to traditional treasury operations. By harnessing the power of treasury transformation, we will cater to a wide range of businesses regardless of size or sector, truly standing as the ultimate solution for your treasury woes.
Shifting gears to a more intimate perspective, imagine the freedom of managing your treasury functions without compromise. What if you could adopt advanced financial strategies without sacrificing simplicity and ease of use? With an air of optimism and a sprinkle of encouragement, let us reassure you: not only is this possible, but it’s also within your reach. There are innovative, user-friendly options that respect your unique business needs while leading you toward state-of-the-art treasury management.
Welcome to this in-depth guide, a treasure trove of insights into the world of treasury transformation. Here, you will unearth crucial aspects of the process, from understanding what treasury transformation entails to set clear objectives, managing stakeholders, and navigating potential challenges.
For instance, ever considered the impact of multiple ERP systems on your treasury transformation? Our guide will delve into such specifics and more. As you reach the end of this exploratory journey, anticipate a sense of empowerment and readiness to embark on your treasury transformation adventure, fuelled by knowledge, excitement, and possibility. Buckle up; it’s going to be an informative and engaging ride!
Dive in to uncover these insights and more, setting your business on the path to an efficient, forward-looking treasury department!
Getting to Know Kevin Braeckman: Director at PwC Belgium
Let’s take a moment to get to know our guest on today’s podcast. Kevin Braeckman, a director at PwC Belgium, has been part of the PwC family since 2011. Kevin is passionate about supporting clients through transformative treasury projects, helping them define and implement target operating models that align with their business objectives. His work often involves navigating the complexities of multi-year treasury transformation projects, offering a deep dive into how organisations can improve their treasury departments.
Apart from this, Kevin is also at the helm of the Treasury Audit Service offering, leading the review of some of the most intricate treasury centres.
In today’s episode, we’ll delve into some enlightening topics with Kevin. We’ll be looking at the essence of a treasury department transformation, the characteristics of a top-tier treasury department, the reasons behind lengthy treasury transformation projects, and much more.
Through this engaging conversation with Kevin, you will also gain insights into his role in advising corporate entities on various topics. These include treasury systems, bank and funding management, financial risk management, and, most importantly, treasury transformation.
So, buckle up as we dive into this enlightening discussion with Kevin Braeckman and unravel the intricacies of treasury transformation together.
Defining Treasury Transformation: What Does it Mean?
Let’s dive into the nitty-gritty of what transforming a treasury department means, as explained by our expert guest, Kevin Braeckman.
So, what is it about? Picture giving your treasury department a thorough health check-up. It’s about examining every nook and cranny, highlighting what works like a charm, and pinpointing snags that might slow you down.
But wait, there’s more! This isn’t a solo mission. The crew conducts benchmarking against companies similar to yours. So, you get a glimpse of how you’re doing compared to your peers; pretty cool, right?
Next on the agenda, the team pinpoints gaps. Think about your ultimate vision for your department and measure it against what’s happening now. You might stumble upon opportunities you haven’t even thought about! That’s where Kevin and his teammates step in, spotting these hidden treasures and ranking them according to effort and value.
Imagine having a to-do list where you mark tasks with high impact but require little effort against those demanding a lot of effort but offering a great return. The team assists in mapping these tasks for future multi-year projects, ensuring you reap the maximum benefits.
Here’s the kicker: Treasury transformation is much more than a one-trick pony. It’s a powerful 360-degree approach, considering system perspectives, process angles, and banking viewpoints.
So, the next time you’re scratching your head, wondering how to spruce up your treasury department, remember this – a thorough transformation might just be what you need. It’s about looking at your operations from a bird’s-eye view and making strategic enhancements to build a more efficient and effective treasury department. Because let’s face it, who wouldn’t enjoy a well-done makeover?
The Purpose of Treasury Transformation: Bridging the Gap
We have a clear question: what is the ultimate goal of treasury transformation? The answer is quite straightforward, as Kevin Braeckman explains: it’s all about better supporting the company.
You see, the treasury department plays a crucial role in any company. It’s not just the guy who keeps track of the money. Instead, it supports the company’s operations by managing financial risks, ensuring cash availability, and much more. But what happens when there’s a gap between what the treasury department could do to best support the company and what it’s doing? This is where treasury transformation steps in.
Kevin talks about two levels of support a treasury department can provide. At the group level, it’s about ensuring cash is available for investments. This could be achieved by centralising cash to support HQ entities or hitting the debt markets to raise additional funds.
But the support doesn’t stop there. At the business level, the treasury department ensures enough cash for day-to-day operations and helps businesses understand the risks they face from these operations. For example, the treasury department can educate about the impact of sending an invoice in a foreign currency.
However, the reality is that many treasury departments want to offer this comprehensive support but are bogged down with day-to-day operations. They’re so caught up in manual, repetitive tasks that there’s less time for value-add strategic support. This is where treasury transformation can be a game-changer.
Through treasury transformation, processes and systems can be set up and automated to reduce the burden of manual, repetitive tasks. This frees up more time for the treasury department to focus on strategic support for the company. In short, treasury transformation is all about helping your treasury department work smarter, not harder, to provide the support your company needs.
When is the Right Time for Treasury Transformation?
Let’s talk about the big question – when is the right time for a company to take a leap of faith and initiate its treasury transformation journey? Our expert, Kevin, points out that the triggers can vary greatly, but three common scenarios often light the fuse.
New Leadership: A Fresh Pair of Eyes
When a new treasurer takes the reins, it’s like fresh air. This change in leadership often acts as a spark, setting off the transformation process. The new leader might see opportunities for change in the existing setup, leading them to reassess and compare with similar organisations.
Rapid Company Growth: Time for an Upgrade
Imagine those tech companies or other businesses shooting up like a rocket. As they expand, their treasury departments might not keep pace. After all, managing a treasury for a small business versus a giant corporation is a whole different ball game. That’s why it becomes crucial to shape a treasury function that scales with the company’s size.
Growth by Acquisition: Uniting Unique Entities
If a company expands primarily through acquisitions, you’ll have a collection of companies, each dancing to its tune. This scenario calls for a treasury transformation to bring all these entities under a unified treasury function.
Remember, there’s no “one-size-fits-all” approach to when a company should opt for treasury transformation. A change in leadership, a growth spurt, or a series of acquisitions might trigger it.
However, one thing stands true – recognising the need for treasury transformation is the crucial first step towards enhancing your treasury function. If you spot that your treasury department isn’t running at its optimal pace or capacity, it’s time to take action. And believe me, that decision can dramatically boost your company’s financial well-being.
Does Company Size Matter for Treasury Transformation?
You might be wondering if there’s a specific company size that’s more inclined toward treasury transformation. According to Kevin, the answer is both yes and no. Here’s why:
Treasury Department: A Matter of Size and Scope
Firstly, a company needs to reach a certain size before it can afford a dedicated treasury department. Typically, Kevin explains, companies with revenues under $1 billion may have treasury functions, but they’re often part of a broader finance department rather than a separate entity. Also, companies focused predominantly on domestic markets, with less international business, usually focused less on treasury.
Transformation Threshold: It’s More Complex Than Size
However, size isn’t the only consideration when transforming a treasury department. It’s not about reaching a certain threshold and automatically requiring a transformation. The complexity of the task increases as the size of the company—and hence the treasury function—increases.
Strategizing Transformation: One Step at a Time
If your company’s revenue falls between $1 billion and $10 billion, it might be possible to take a holistic view of all areas like financial risk management, cash, and liquidity systems. You can then devise a comprehensive transformation plan (potentially) over multiple years to elevate the treasury function to the next level.
But for larger companies, implementing everything at once might not be feasible. Instead, a more focused approach may be needed, working on different areas in a phased manner. For instance, you might spend a few years focusing on cash and liquidity, then move on to financial risk management.
So size does matter, but it’s not the be-all and end-all for treasury transformation. What’s crucial is understanding your company’s specific needs and planning the transformation process accordingly. It’s about taking baby steps, prioritising what’s necessary now, and gradually building up to a fully transformed, efficient treasury function. And remember, it’s always okay to ask for help if you’re unsure how to kickstart this transformation journey.
Main Objectives of a Treasury Transformation
Defining the key objectives guiding this process is essential when a company undertakes a treasury transformation. While these objectives can vary across companies, Kevin Braeckman identifies three that are commonly pursued:
Control and Visibility: Surprisingly, many large companies struggle to accurately state how much cash they have at any given moment, especially on local accounts without daily visibility. Monthly accounting processes often delay such visibility. Therefore, a key objective in treasury transformation is gaining better control over and visibility into cash flows—both incoming and outgoing transactions. Also, this objective extends to having a clear view of the financial instruments being used and the company’s exposure to financial risks (like changes in exchange rates).
Automation: Treasury departments, being support functions, often face challenges in securing internal budgets. Hence, they need to use the resources they have very efficiently. This leads to a strong focus on automation—specifically, automating recurring, repetitive tasks. This process frees up time for the treasury team to provide more valuable support to the business, such as offering strategic advice.
Cost Savings: Due to limited budgets, many treasury departments consider cost-saving measures a major objective in their transformation. Reducing costs can help make the department more efficient and ensure it can perform its necessary functions.
While these objectives aren’t one-size-fits-all, they are common in treasury transformations across different companies. It’s essential to clearly define these objectives at the start of the transformation journey, as they will guide the process and help ensure its success.
The Importance of Cash Visibility for Treasury
You may wonder why cash visibility is a significant focus for treasury departments. Kevin explains the reasons behind its importance:
Capitalising on Opportunities
In today’s environment of rising interest rates, having clear visibility and access to cash has become even more crucial. It’s not uncommon for companies to seek external borrowing while simultaneously having cash sitting idle in local accounts—completely unaware of its existence. This lack of visibility represents a direct opportunity cost, as potential advantages are missed.
Treasury departments can optimise their cash management by having visibility into cash holdings. They can centralise cash and allocate it most efficiently, eliminating unnecessary costs associated with excess ordering or underutilisation. With a clear view of available cash, treasury teams can make strategic decisions on how best to utilise it.
Cash visibility enables treasury departments to make better investment choices. Instead of keeping idle cash in local accounts, they can invest it more efficiently. This allows them to generate higher returns on their cash holdings rather than settling for suboptimal investments or low-interest accounts.
In summary, cash visibility is critical for treasuries to capitalise on opportunities, maximise efficiency in cash management, and enhance overall returns. By knowing where their cash is, treasury departments can make informed decisions aligning with the company’s financial goals and ensure that their cash works as hard as possible.
Defining a Best-in-Class Treasury Department
As the conversation continues, the focus shifts to defining what constitutes a best-in-class Treasury department. Kevin provides his perspective on this, which is based on insights gathered through surveys and client interactions:
Business Partner and Value Creation
Kevin believes a best-in-class Treasury department acts as a valuable business partner. This means sharing knowledge and experience to help other departments, such as CFOs and business units, create value. For example, guiding mitigating foreign exchange risks and implementing effective strategies. The Treasury Department becomes a trusted advisor, offering insights beyond traditional financial products banks provide. By aligning operations and currency usage, they can help reduce risks and improve financial outcomes.
Access to Liquidity and Risk Mitigation
Another key aspect of a best-in-class Treasury department is its ability to provide access to liquidity and mitigate risks. This involves ensuring the business has the cash flow to meet its operational needs and reducing exposure to various financial risks. The Treasury Department is critical in supporting the company’s financial stability by managing liquidity effectively and implementing risk mitigation strategies.
Automation for Value-Added Activities:
Kevin highlights the importance of automation in a best-in-class Treasury department. The Treasury team gains more time to focus on value-added activities by streamlining day-to-day operations and automating repetitive tasks. This includes engaging with the business, understanding their needs, and providing them with the necessary support and added value. Automation enhances efficiency and enables the Treasury Department to deliver on its potential truly.
It’s important to note that the definition of a best-in-class Treasury department may vary based on different perspectives and contexts. However, for Kevin, it encompasses being a trusted business partner, providing value through knowledge-sharing, ensuring access to liquidity, mitigating risks, and leveraging automation to optimise operations.
Taking Action: Automation and Payment Systems
How Treasury departments can take actual actions to support the business. The host highlights the importance of automating manual and repetitive tasks to enhance visibility and decision-making speed. Kevin explains how Treasury departments can turn this into actionable steps, highlighting the example of payment systems and the increasing threat of payment fraud.
Centralised Payment Infrastructures
Kevin emphasises that payment fraud attempts have surged recently. Treasury departments have helped clients set up central payment infrastructures to combat this. These infrastructures connect all internal payment systems, creating a single channel to the bank. The benefits are two-fold: eliminating manual processes and dependencies, reducing the risk of human error and fraud, and providing central visibility into payments.
Payment Process Automation
With the centralised payment infrastructure, the entire payment process can be streamlined and automated. From creating payments in the ERP system to transmitting them to the bank, manual interventions such as file downloads, uploads, or manual data entry are no longer required. This reduces the risk of payment fraud and frees up time for Treasury teams to focus on more value-added tasks.
Automated Bank Statement Reconciliation
Implementing the central connectivity tool with the bank also automates bank statement reconciliation. Instead of manually handling and processing bank statements, Treasury departments can now receive electronic, structured formats seamlessly uploaded into local accounting systems. This automation eliminates the need for labour-intensive manual tasks and allows Treasury professionals to allocate their time and expertise to more strategic activities.
By investing in technology and implementing centralised payment systems, Treasury departments can enhance control, visibility, and security over outgoing flows. Additionally, automating bank statement reconciliation optimises processes, reduces manual effort, and allows Treasury professionals to focus on higher-value activities.
Ultimately, taking these actions helps Treasury departments support the business more effectively, minimise risks, and ensure that resources are allocated where they can make the most impact.
Tailored Approach: Assessing Needs and Prioritising
Ready for a sneak peek into how treasury transformations work? Our expert, Kevin, gives us the inside scoop on the approach. It’s not always about a total makeover of the treasury department or the treasury management system (TMS). Often, it’s about selectively fine-tuning areas that need a touch-up.
Step 1: Stakeholder Interviews and Assessment
Let’s start at the beginning. Before jumping into any transformation, it’s crucial to understand the current state of affairs. That’s why Kevin emphasises conducting interviews with the people who matter – the stakeholders. This step helps to understand how the treasury department ticks, what’s running like a well-oiled machine, and what could use some tweaking. By marrying this feedback with some good old benchmarking against other companies, you end up with a wholesome list of potential areas for sprucing up.
Step 2: Weighing Effort and Benefit
Once you’ve got your list, it’s time to assess the effort and payoff of addressing each issue. Those areas might take a back seat if the benefits don’t match the effort. Conversely, if an area promises a substantial improvement for a reasonable amount of effort, it’s bumped up to priority status.
Step 3: Collaboration and Sensible Planning
Now, this isn’t a solo mission. It’s a team effort between Kevin’s team and the treasury department. Together, they decide what to focus on – areas that make the most business sense. It’s essential to consider the treasury department’s capacity because, let’s face it, they’re juggling their regular duties along with this transformation journey. That’s why the pace of change is set based on what’s realistically manageable over a longer period.
Instead of a total revamp, this approach fine-tunes specific improvement areas. It ensures the transformation efforts align with the company’s needs, resource capacity, and long-term goals. The transformation journey becomes doable and truly effective by focusing on the most impactful changes and collaborating closely with the treasury department.
Managing Change and Impact on People in Treasury Transformations
Now, let’s dive into how treasury transformations impact governance, processes, technology, and, most importantly, the people at the heart of it all. What aspects undergo a makeover, and how does it intertwine with the human element?
Embracing Change and Winning Support
First and foremost, Kevin emphasises the role of change management in treasury transformations. Let’s face it – we humans are creatures of habit. Changes? Not so much our favourite thing. So, to set the stage for a successful transformation, you need to get the thumbs up from stakeholders across various levels – group, regional, and business unit. This involves walking them through the benefits of the proposed changes and addressing any apprehensions they might have.
Treasury transformations impact the people involved in a big way. That’s why efforts to manage change revolve around understanding and considering their concerns in the transformation process. For people to back the transformation and contribute to its success, they need to grasp what it’s all about and how it benefits them.
Job Security and New Opportunities
Kevin debunks a myth that automation and cost-saving measures in treasury transformations lead to job cuts. He underlines that, in their experience, treasury teams have always grown post-transformation. Tasks previously done by individuals devoting only a part of their time are now consolidated and given to dedicated resources. This creates more space for individuals to focus on their main duties, leading to a rise in team size.
Change Management: It’s Not Just for the Treasury
Managing change isn’t only about treasury pros. As treasury has tight connections with tax, legal, and finance functions, managing change also involves professionals in these areas. Open communication and addressing worries can soothe fears and create a supportive backdrop for the transformation.
To sum up, successful treasury transformations require effective change management to win stakeholders’ buy-in and keep their support throughout the process. Addressing people’s concerns, clarifying the benefits, and highlighting the creation of new opportunities instead of job losses is essential to managing the transformation’s human impact. By nurturing an environment of understanding and teamwork, treasury departments can navigate the waves of change and achieve fruitful outcomes.
Transforming Treasury Activities: A Comprehensive Approach
The conversation now zooms in on the tasks or activities in the treasury that get a makeover as part of a transformation project. Beyond just payment systems and cash visibility, what areas do we typically see changes in?
The Key Role of Treasury Management Systems (TMS)
Kevin points out that treasury management systems are at the heart of treasury transformations. When helping companies pick, implement, or improve their current systems, every aspect of the treasury comes into play. This encompasses everything from cash management, search engines for market data, bond management, company loans, external loans, and investments to banking relationships. Essentially, the transformation project could impact all the topics we’ve covered in the podcast.
The Wide-ranging Scope of Transformation
The extent of a treasury transformation project can vary based on what the company aims for and needs. It could range from focusing on specific aspects of the treasury to tackling multiple areas at once. Deciding which areas to prioritise depends on the company’s current state, the future state they’re aiming for, and where they feel the need for investment is the greatest.
To summarise, treasury transformations involve a comprehensive approach to spruce up treasury activities. The transformation often revolves around treasury management systems and covers multiple aspects of treasury operations. This could include cash management, market data, loans, investments, and banking relationships. The transformation project’s scope is custom-made to meet the company’s specific objectives and can touch upon one or more areas based on their priorities.
Timelines in Treasury Transformation: Tailored to Company Needs
Let’s turn our attention now to the timelines that come with treasury transformation projects. How long do they usually take? Well, it’s not a one-size-fits-all answer as it varies, but let’s hear Kevin’s insights on the shortest, longest, and median timelines he’s observed.
Treasury Transformation: The Time Factor
Kevin clarifies that treasury transformation projects aren’t done overnight. They’re typically multi-year undertakings. The exact duration, however, depends on your company’s unique circumstances and resources. Having dedicated internal project managers solely focused on the transformation could speed things up. These project managers are the torchbearers, engaging stakeholders and moving the project along faster.
What Influences the Timeline?
The timeline of a project could swing from one year to five years or even longer! It all depends on how big and complex the changes you want are. But Kevin reminds us that there’s a lot of middle ground between these extremes. Many rides on the availability of internal resources, the treasury team’s involvement, and the balancing act between regular tasks and project responsibilities.
The Importance of Milestones
Kevin points out the significance of setting interim milestones within the project timeline. These markers are like little celebrations along the journey, allowing everyone to see real results and achievements. The project team can show continuous progress by setting specific milestones like activating a new bank, launching a new payment system in a region, or successfully wrapping up the transition for a specific entity. This also helps gradually build the new, transformed treasury function.
To wrap up, there’s no set timeline for treasury transformation projects. Instead, it’s customised to each company’s needs and resources. Depending on the scale and complexity of the project, the timeline can span from one to five years or more. Key factors influencing the timeline include the availability of dedicated project managers, internal resources, and balancing everyday tasks with project responsibilities. Incorporating milestones into the timeline allows visible progress and builds confidence as the transformed treasury function gradually takes shape.
Engagement of Stakeholders and Alignment with Other Departments in Treasury Transformation
Let’s dive into what makes treasury transformation projects tick. More specifically, what factors cause these projects to have longer timelines? Is it all about aligning and engaging with stakeholders, or does it boil down to prioritising within companies? Let’s hear Kevin’s take on it.
Stakeholder Engagement: A Time Factor
Kevin concurs that engaging with internal and external stakeholders makes a big difference in the duration of treasury transformation projects. If you want your project to succeed, you need to be on the same page as stakeholders like the tax department, legal team, IT department, and vendors. These parties have schedules and commitments, which can inevitably impact your timeline.
Working Hand in Hand with Other Departments
When it comes to changes in liquidity structures, for example, it’s all hands-on deck across various departments. You’ll need tax considerations, legal contract reviews, and collaboration with the IT department to sync up with the treasury transformation project. The resources available and the capacity to sync with multiple projects across different departments can sway your timeline.
Juggling Act: Transformation and Day-to-Day Operations
While transforming the treasury is certainly a top priority for the treasury department, you can’t lose sight of your daily operations. The treasury team has to ensure the business runs like clockwork and that critical activities, such as acquisitions, aren’t hampered. This juggling act can stretch the timeline of the project.
A Silver Lining: Positive Developments
However, Kevin notes that the treasury system space has seen some bright developments in recent years. These developments have made parts of the treasury transformation less disruptive to overall operations. But don’t forget; you still need to engage and collaborate with stakeholders, including your own team, and line up with other departments to ensure project success.
So, to sum up, the timeline of treasury transformation projects gets shaped by how you engage and align with stakeholders, both within and outside your company. Collaborating with other departments like tax, legal, and IT and balancing the transformation with your regular operations can stretch the timeline. Despite positive advancements in the treasury system space, it’s still crucial to devote adequate time to engaging with stakeholders and aligning with projects in other departments for a successful transformation.
Long-Term Considerations and Scalability in Treasury Transformation
With technology evolving at breakneck speed, you might wonder if treasury transformation projects will be outdated before they’re even completed. After all, the power of computers and technology is increasing quickly. But Kevin has some insights that will clear the air.
Planning Ahead: Your Key to Success
When you’re at the starting line of a transformation project, Kevin recommends thinking long-term. Try to envision potential shifts in regulations, technology, and industry trends. If you factor these in from the get-go, your transformation can be built to adapt and stand the test of time.
Designing for Growth and Change
It’s important to design your treasury structures to be scalable and flexible. In other words, your systems and processes should be ready to incorporate new companies and adjust to changes over time. By laying a foundation ready for future growth and changing needs, you can keep your transformations to a minimum.
A Fresh Trend: The Rise of SaaS Solutions
Let’s not forget about a major trend shaking up the treasury system space: Software-as-a-Service (SaaS) solutions. These services provide a standardised product that the provider upgrades automatically, so you don’t have to worry about maintaining and updating the system internally. According to Kevin, smaller treasury departments that don’t need many custom features can benefit from SaaS solutions. They get automatic updates without needing a large internal IT department.
To wrap it up, even though technology is advancing quickly, Kevin underlines the importance of planning and building scalable and flexible structures in treasury transformation projects. By considering scalability and harnessing the power of SaaS solutions, your company can create systems and processes ready to adapt to future needs. This will help cut down on the need for frequent transformations.
Setting Clear Objectives and Monitoring Progress in Treasury Transformations
Let’s dive into an exciting chat where Kevin lays out some wisdom about successfully driving treasury transformation projects. As he speaks, you’ll realise it’s all about setting clear goals, monitoring your progress, and understanding the elusive ‘Target Operating Model’ (TOM)!
Goals: Your Project’s North Star
When you’re about to dive into a treasury transformation project, Kevin suggests your first step should be setting clear objectives. What are you aiming for? Global cash visibility? More organisational agility? Higher automation levels? Once you know your endgame, it can guide the project to stay focused and aligned.
Track Your Progress: Keep Your Project in Check
Kevin can’t stress enough how vital it is to occasionally review your objectives as your project unfolds. It’s crucial to pause, step back, and ask yourself if your actions and decisions are still following the path to your goal. This check-in can keep your project on track and help you avoid detours.
In short, Kevin reminds us how vital clear goals are when you’re tackling a treasury transformation project. He suggests closely monitoring your progress to ensure alignment with these objectives. This approach helps maintain focus and lets you make necessary adjustments, steering the project towards the desired outcomes.
Demystifying the ‘Target Operating Model’ (TOM)
Have you ever encountered the term ‘Target Operating Model’ or TOM and found it puzzling? Well, Kevin breaks it down for us:
- Start with the End in Mind: Your TOM begins with defining the objectives you want to achieve. After that, you focus on different functional areas within treasury, like working capital management and risk management. Your task here is to think about these areas from a process perspective and determine how to reach your goals.
- Designing the Path: Kevin uses risk management as an example to explain the process design aspect of TOM. It’s all about defining the steps and processes leading to your goal. For instance, identifying the exposure, checking data quality, consolidating exposures at various levels, and determining your risk mitigation strategy.
- Support Your Processes with Tech: Once you’ve agreed on the processes, it’s time to think about the systems that will support them. This involves deciding what technology and tools you’ll need to run your processes efficiently.
- People Matter: The last, but certainly not least, aspect of TOM is the people. Who will carry out these processes? What capabilities are required, and what’s the staffing requirement? It’s crucial to think about this.
- Putting it All Together: TOM ties together process design, system support, and the people aspect. It gives you a complete picture of how your future treasury operations should work to meet your defined objectives. TOM essentially acts as a blueprint that aligns processes, systems, and people for your treasury transformation.
So, in a nutshell, the Target Operating Model (TOM) in treasury transformations includes defining your goals, designing processes, implementing system support, and factoring in the people aspect. It creates a robust framework that harmonises all these elements to guide your treasury transformation towards its ideal future state.
Understanding Transformation Roadmaps in Treasury Transformations
So, you’ve learned about the ‘Target Operating Model’ (TOM) and are now thinking about implementing it. Kevin shares that the roadmap in a treasury transformation project is like your trusty compass. It helps you prioritise and sequence various tasks since let’s face it, we can’t juggle everything at once. The roadmap identifies which projects will bring the most value and in what order they should be tackled.
- Jigsaw Puzzle of Transformation Steps: Sequence your transformation steps wisely, Kevin advises. Take into account the effort required and dependencies between different projects. For instance, when implementing central payments, it’s smarter to trim down the number of banking partners before setting up the payment system. Efficiency, thy name is an order!
- Don’t Ignore the Bigger Picture: Remember, your treasury transformation doesn’t exist in isolation. Consider other ongoing projects within the company. If a new ERP system is in the works, ensure your transformation aligns with its timeline. This coordination can reduce the overall effort while maximising transformation benefits.
- Striking a Balance: It’s about finding the perfect equilibrium between effort and benefits, says Kevin. Projects that bring the most significant benefits should be prioritised, focusing your efforts on the most impactful areas.
- Deadlines – the Double-edged Sword: Deadlines are important, but don’t let them rule you, Kevin suggests. Some flexibility is vital in the grand scheme of transformation projects, especially those sprawling over multiple years. Yes, meet your deadlines, but don’t compromise on proper implementation and alignment with other ongoing initiatives.
In summary, a transformation roadmap is your treasure map for treasury transformations. It keeps your eyes on the prize while ensuring you don’t miss the forest for the trees. Deadlines matter, but they should be balanced with the need for proper implementation and alignment with broader transformation goals.
Impacts of Treasury Transformations on Other Departments
When the treasury department transforms, it’s not an isolated event. A change in treasury is like a pebble thrown into a pond – the ripples can reach far. Kevin explains that treasury transformations can significantly impact IT, legal, and tax departments.
- IT Department: In many treasury transformations, the IT department is an essential ally, especially when new systems must be implemented. The good news? If your treasury systems operate as SaaS products, the vendor largely handles maintenance and updates, reducing the burden on IT.
- Legal and Tax: Whenever funding structures, intercompany loans, or cash pooling changes occur, they can have tax implications. Collaboration with the tax department is vital to ensure compliance and mitigate potential extra tax costs. Likewise, you’ll need legal support to negotiate contracts with third parties.
- Business Units: They might not be immediately apparent, but treasury transformations can significantly impact business units. For example, business units must provide accurate data about sales and future purchasing needs when implementing a cash flow forecasting module.
Kevin’s key takeaway is clear – treasury transformations can’t happen in a vacuum. Collaborating with IT, legal, tax, and business units ensures smooth implementation and alignment with broader company goals.
Impacts of Multiple ERP Systems on Treasury Transformations
Dealing with multiple ERP systems during treasury transformations can be tricky and Sounds like a headache, right? Kevin acknowledges that it’s a common issue, especially for companies that have grown through acquisitions or mergers. He also explains how to navigate this tricky situation.
Kevin acknowledges that many clients have multiple ERP systems due to growth through acquisitions or mergers. This multi-ERP environment presents challenges, particularly in the context of treasury operations. Here are the key points addressed by Kevin:
Payments and Data Format: Multiple ERP systems generate payments in different formats, making establishing a unified connection with external banks difficult. Kevin suggests implementing systems that can consolidate the payment files from internal ERP systems into a common format accepted by banks. Similarly, when bank statements are received, systems can be set up to convert them into a standard format compatible with local ERP systems.
Financial Reporting and Accounting: Multiple ERP systems impact financial reporting at the group level. It also affects treasury transactions, as the treasury management system handles the accounting for these transactions. Additional complexity arises when transactions need to be booked in multiple ERP systems. Generating files in different formats to accommodate the requirements of each local ERP system becomes necessary.
While multiple ERP systems add complexity, Kevin emphasises that technological solutions are available to address these challenges. Implementing systems and processes can help streamline payment formats, facilitate data integration, and support financial reporting across multiple ERPs.
Regarding ERP transformations being the most challenging, Kevin does not explicitly state whether they are the hardest transformation projects. However, his response suggests that managing multiple ERP systems within the context of treasury operations poses challenges, but technological solutions and strategies can mitigate these complexities.
Challenges and Red Flags in Treasury Transformations
In this part of the conversation, the host asks about the main challenges in a treasury transformation and whether any red flags indicate the project will be particularly difficult. The host also seeks clarification on the impact of change management and decentralised organisational structures.
Kevin provides the following insights:
Change Management: Kevin emphasises that one of the significant challenges in treasury transformations is the change management aspect. Working with people and disrupting their day-to-day operations requires time and effort to explain the benefits, listen to their needs, and provide reassurance that the transformation will ultimately benefit them in the long run. Change management is a critical factor that can affect the success and smooth execution of a transformation project.
Decentralised Organisational Structures: Global group-wide transformations can be more complex in companies with decentralised structures where local units have more decision-making autonomy and their ways of working. Alignment to a standard way of working may not be the norm, requiring additional effort to centralise and align processes and systems across the organisation. In such cases, prior or gradual centralisation initiatives as part of the transformation project can help streamline the process, but it may require more time and focus on change management.
Kevin’s response highlights the importance of addressing change management challenges and adapting the transformation approach based on the organisational structure and context. These factors should be considered to ensure successful outcomes in treasury transformations.
Skills Required in Treasury Transformations
So what are the critical skills needed for treasury transformations, specifically regarding people/stakeholder and project management? The host further inquires about other essential skills in this context.
Kevin provides the following insights:
Project Management: Kevin acknowledges that project management is crucial in treasury transformations. Given the involvement of multiple stakeholders and various sub-projects, effective project management is essential to ensure alignment, coordination, and successful execution. Having a program manager who oversees the different projects and ensures their alignment is particularly valuable.
Technical Skills: Kevin emphasises the importance of technical skills in treasury transformations. Hiring external consultants brings the advantage of their experience, knowledge of potential pitfalls, and access to tools that can accelerate the process. These technical skills enable consultants to identify roadblocks and provide solutions, contributing to the smooth progress of the transformation project.
The skills required in treasury transformations encompass project management expertise, stakeholder management, and technical proficiency. These skills are vital for effectively navigating the complexities of the transformation process and achieving the desired outcomes.
Quantitative Benefits and Cost Savings in Treasury Transformations
The host discusses the importance of achieving quantitative benefits and cost savings in treasury transformations. They inquire whether these projects need to be self-financing and bring additional savings that make them financially worthwhile in the long term.
Kevin provides the following insights:
Business Case and Cost Savings: Kevin explains that it is important to establish a business case and cost analysis at the start of the project. This involves identifying the costs associated with implementing the transformation and the expected savings over a multi-year period. While not every client may have significant budgets allocated to the treasury, it is crucial to demonstrate the transformation project’s financial benefits and potential cost savings.
Return on Investment (ROI): Kevin points out that most treasury transformation projects require an initial investment for the first one to two years. However, the business case typically turns positive after this initial period, and the project generates savings. Over time, as the systems and processes become more efficient and cost-effective, the return on investment increases. Recurring savings through optimised banking structures, reduced borrowing costs, streamlined processes, and reduced fees contribute to the project’s positive business case and long-term financial benefits.
Quantitative benefits and cost savings play a significant role in treasury transformations. Establishing a positive business case and demonstrating the project’s financial value is essential for gaining support and ensuring the long-term success of the transformation endeavour.
Example of a Treasury Transformation Project
Kevin to walk us through a real-life example of a treasury transformation project he has led. Kevin provides the following details:
Context: The transformation project was conducted for a Belgian company that approached Kevin’s team seeking assistance in gaining central visibility and control over their cash. As they delved into the company’s operations, it became clear that there were opportunities beyond just payment systems.
Objectives: The primary objectives of the project were to implement a new treasury management system (TMS) for centralising treasury operations, automate accounting processes, implement a centralised payment system linked to external banks, reduce the number of banking partners, and streamline trade finance processes.
Key Steps and Achievements:
- TMS Implementation: Kevin’s team helped the company select and implement a new TMS, allowing for centralised visibility of treasury instruments and automation of accounting processes. This modernised infrastructure enabled the company to cope with rapid growth.
- Centralised Payment System: A centralised payment system was implemented, connecting all internal ERP systems to a single platform. This streamlined payments and reduced manual effort, enhancing efficiency.
- Sanctions Screening: The central payment system was linked to a sanctions screening tool, ensuring that payments were not made to entities on sanctions lists. This tool provided real-time updates on sanctions, reducing compliance risks.
- Reduction of Banking Partners: The company had numerous banking partners, which were reduced from 80 to 50, facilitating the rollout of the payment factory. This consolidation simplified banking relationships and improved efficiency.
- Bank Account Rationalization: Over 60% of bank accounts were closed by challenging the use of multiple accounts for the same purpose and centralising foreign currency payments. Payments on behalf of local business units reduced the need for local accounts.
- Trade Finance Centralisation: Trade finance processes, specifically bank guarantees, were centralised by implementing a central platform. This provided visibility and automation for incoming and outgoing guarantees.
The main challenges in this project included integrating multiple systems, coordinating with internal IT teams, managing change and stakeholder expectations, and ensuring compliance with evolving sanctions regulations.
The project successfully achieved its objectives, providing the company with centralised visibility and control over cash, automation of processes, reduced banking partners and bank accounts, improved trade finance management, and enhanced compliance.
The business case for the project yielded positive results. Although the focus was primarily on qualitative benefits, the project’s payback period was less than three years, demonstrating a positive return on investment.
Overall, this example showcases how a treasury transformation project can address specific objectives, improve operational efficiency, and deliver tangible benefits to the company.
Streamlining Payment Systems and Banking Landscape: A Phased Approach
Embarking on a journey to transform payment systems and rationalise the banking landscape sounds daunting, doesn’t it? But fear not! In this chat segment, Kevin Braeckman shares his insights on the timeline for implementing these changes, highlighting the importance of a phased approach.
The Phases Unveiled
So, let’s break it down into four key phases:
- Year One – Laying the Foundation: The initial year was about implementing the new treasury management system. This crucial phase established the infrastructure and systems necessary for the transformation journey.
- Years Two and Three – Connecting the Dots: The following two to three years focused on rolling out the payment factory. The objective was to connect the payment system with all the banks involved. This integration made transactions seamless and streamlined the payment landscape.
- Year Four – Incorporating Smaller Entities: In the fourth year, the spotlight shifted to incorporating smaller entities and addressing the fixed finance aspect. This phase aimed to integrate and optimise financial processes within these entities, creating a more cohesive and efficient banking landscape.
Success is a Journey, Not a Destination
It’s important to note that not every component experienced success. Despite meticulous planning and execution, some elements faced challenges or exceeded expectations. This reminds us that transformation is a continuous journey of refinement and improvement.
Why Phasing Matters
Adopting a phased approach is key to successfully navigating transformative changes. Trying to tackle everything at once can be overwhelming and hinder progress. Organisations can better manage complexity and ensure a smoother transition by breaking the process into distinct phases.
The Takeaway: Your Transformation Journey
So, if you’re embarking on a similar transformation journey, keep these key points in mind:
- Phased Approach: Divide the journey into distinct phases, focusing on one aspect at a time. This targeted approach allows for better management of complexities and increases the chances of success.
- Flexibility and Adaptability: Stay flexible and open to continuous refinement. Not every component may go according to plan, and that’s okay. Embrace the opportunity to learn and adapt along the way.
- End Goals in Sight: Remember, the ultimate goal is to drive lasting improvements in your payment systems and banking operations. You can achieve transformative results by adopting a strategic approach and staying focused on the end goals.
So, prepare to embark on your transformation journey with a phased approach, flexibility, and a clear vision of your end goals. With careful planning and a steadfast commitment, you’ll streamline your payment systems and create a more efficient banking landscape.
Challenges and Collaboration in Transforming Treasury Departments
Regarding transforming treasury departments, change management and stakeholder management are widely recognised as significant challenges. Kevin acknowledged the importance of these hurdles, particularly in decentralised groups.
Despite facing initial resistance, he revealed that the transformation process went smoothly. A major factor contributing to this success was having a supportive sponsor on the client’s side. This individual played a crucial role in guiding the transformation efforts and effectively communicating the importance of the changes to local stakeholders.
The Power of Collaboration and Consulting
Kevin emphasised that treasury transformation projects are not solitary endeavours. Collaboration is key to success. While some companies attempt such projects independently, Kevin highlighted the benefits of involving consultants. These professionals bring additional support, expertise, and fresh perspectives.
However, he stressed that consultants alone cannot drive the transformation. Instead, a combined effort involving both the consultant team and the client is vital. By actively engaging the client and working together as a cohesive unit, the project can align with the client’s objectives and achieve successful outcomes.
Finding the Right Balance and Priorities
An important consideration highlighted by Kevin is the need to strike a balance between consultant input and the client’s specific needs. Some consultants may overlook the client’s unique requirements and impose their ideas. Kevin cautioned against this approach and emphasised the importance of finding common ground.
By closely collaborating with the client, the consultant can identify the right priorities and ensure that the treasury transformation aligns with the client’s objectives. This approach also enables the integration of the project with other ongoing initiatives within the organisation.
Overcoming Challenges Through Collaboration
Transforming treasury departments poses challenges, but these obstacles can be overcome with effective change management, stakeholder management, and collaboration. Engaging with local stakeholders, having a supportive sponsor, and actively involving the client throughout the process is crucial for success.
By balancing consultant expertise and client needs, treasury transformation projects can achieve their objectives and drive positive organisational change. So, if you’re planning a treasury transformation, remember the power of collaboration, alignment, and the value of working together to accomplish your goals.
Connecting with Kevin Braeckman and PwC Treasury Belgium
To learn more about PwC Treasury Belgium and engage with Kevin Braeckman, interested individuals can visit their website. The website provides additional information about the services and expertise offered.
Guillaume promised Kevin’s email address would be included in the show notes or comments section for direct communication with Kevin. You can find it just here, along with Kevin’s LinkedIn profile:
– email address: email@example.com
– LinkedIn profile: https://www.linkedin.com/in/kevin-braeckman-83740027/
We encourage listeners to contact Kevin with any inquiries or topics they would like to discuss. Kevin was willing to chat quickly or listen to any thoughts and ideas.
If you have any questions, ideas, or interest in the services Kevin Braeckman or PwC Treasury Belgium provided, feel free to visit their website or contact Kevin via the provided contact information.
As we conclude this deep dive into the realm of treasury transformation, it’s important to remember that every journey is unique. Every business has its distinct complexities, objectives, and challenges. Yet, amid these differences, the fundamental need for an efficient, future-proof treasury operation remains universal. Our exploration has aimed to shed light on the various aspects of this transformative journey, equipping you with the knowledge, inspiration, and confidence to navigate this terrain.
Treasury transformation is not a fleeting trend; it’s a strategic shift that will define the future of corporate treasury management. It’s about optimising systems, engaging stakeholders, aligning objectives, and ensuring scalability. With a thoughtful, tailored approach, businesses of all sizes can successfully transform their treasury functions, fostering financial resilience and agility.
We hope you have found this guide enlightening and that it encourages you to embark on your treasury transformation journey. Remember, it’s a journey of discovery, growth, and strategic optimisation. With the right guidance and commitment, your treasury department can emerge as a true strategic partner within your business, bolstering growth, mitigating risks, and ensuring financial stability. Thank you for joining us on this journey, and here’s to your successful treasury transformation!