The Emerging Voice of Treasury and Why More Intercompany Stakeholders Need to Hear It

This is Part 2 of the series, “Improving Communication and Collaboration Between Intercompany Teams” – read part 1 here

It’s hard to imagine a multinational, multi-legal entity business functioning without a Treasury department. After all, the Treasury is essentially responsible for managing money and financing organizations. That includes managing liquidity, protecting working capital, overseeing investments, mitigating financial risk, and forecasting and planning.

Yet, in the realm of intercompany, Treasury hasn’t had a strong voice in driving process and technology changes—even changes that can greatly influence business outcomes.

Often, upstream intercompany processes are unnecessarily manual. Transactional status visibility is limited throughout the organization, making accurate liquidity forecasting extremely difficult and delaying the flow of intercompany cash positions.

However, the Treasury’s voice is growing louder in this process area due to macroeconomic factors and a groundswell of interest among finance leaders in transforming intercompany processes and technologies.

Understanding why Treasury’s voice has been somewhat stifled in the intercompany space requires examining how this function relates to the rest of the enterprise.

Treasury tends to operate as a centralized, in-house function that doesn’t require much monitoring. Treasury teams are relatively self-sufficient, making do with cobbled-together, legacy technologies, while more attention is often paid to departments (and their budgets) that outsource services.

Also, the Treasury doesn’t act until all other intercompany functions have processed transactions and balances are settlement ready. At that point, the pressure is on for Treasury to make critical transacting decisions.

So, there’s been a “set-it-and-forget-it” attitude toward Treasury in large multinational organizations. For example, a CFO might run by Treasury a proposal to transform intercompany systems at the tail end of the decision process.

Large-scale, complex enterprises are starting to do more to ensure that Treasury is equipped to do its job more efficiently and successfully. This change comes as many multinationals are sizing up the intercompany landscape and realizing that they must optimize workflows and adopt new technologies.

In addition to just the sheer size of intercompany operations — one that’s often experiencing expansion through mergers and acquisitions — multinationals and their Treasury departments must contend with:

• The increased cost of borrowing.

• Cash flow trapped in intercompany sub-ledgers.

• Intensified global scrutiny of intercompany processes and compliance.

• A reliance on outdated, manual processes and technologies.

• Limited or no visibility of transactions throughout the ecosystem.

Considering these challenges, finance leaders are beginning to shift their perception of the Treasury and consider this function to be a key stakeholder in making long-term intercompany strategic decisions.

In addition to allowing Treasury a role in determining intercompany strategy, CFOs recognize that Treasury teams must have access to a robust toolbox of solutions.

Treasury needs to be able to quickly pivot to direct working capital from one part of the organization to another, depending on what macroeconomic factors are at play. This could mean settling all Euro balances into US dollars this month and completely reversing the process next month. Treasury must feel confident in its predictions for the enterprise to efficiently and intelligently grow the business. And none of this can happen if the Treasury (or other functions) is working with outdated, manual systems.

Intercompany teams must work with automated, increasingly AI-driven solutions that provide clear visibility throughout the ecosystem. According to Deloitte’s 2022 Global Treasury Survey, 86% of respondents had already implemented application programming interface technologies (API) or were considering adding them in the near future.*

With this clarity, Treasury can foresee market developments like interest rate fluctuations and foreign exchange devaluations. This end-to-end visibility also helps Treasury avoid the rut of continually making last-minute, reactive decisions.

Fixing intercompany issues for Treasury is only one part of overcoming growing challenges plaguing both Treasury teams and the entire intercompany ecosystem. Enterprises that include this department in discussions about transforming intercompany operations at the front end of the process and technology decision-making stage make a big impact throughout the intercompany ecosystem since improvements upstream positively impact everyone else downstream. Data is accurate, transactions zero out, and the close occurs much quicker.

Understanding Treasury's needs in netting and settling intercompany cash positions is key to achieving a complete and integrated intercompany financial management system. It improves Treasury’s ability to forecast and precisely settle intercompany positions. It provides meaningful benefits to an organization, including end-to-end cash visibility, consistency of cash flow, and improvements in managing gains and losses due to currency fluctuations.

* “Deloitte Global Treasury Survey,” Deloitte, November, 2022, p. 30.