Navigating treasury transformation

With long-term transformational undertakings like this, setting expectations and assembling a cross-functional team from the outset is essential. This team will need to extend beyond treasury into finance, accounting, tax, IT and legal departments. While liquidity structure projects will look different for each treasury organization, there are some key steps you can take to make the process easier.

A well-implemented cash consolidation initiative could:

• Drive tax efficiencies and savings.
• Reduce intercompany loan reconciliation.
• Reduce interest expense through faster repayment of debt.
• Eliminate manual work for cash management teams.
• Automate journal entries for accounting teams.

As a first stage, define the high-level issues you want to resolve. Determine whether your goals are achievable and quantify the benefits the initiative may bring. Could you potentially save $1 million on tax and legal fees? Or could cash oversight simplification save 30 hours a month for your treasury and accounting teams? Assessing the benefits in this way can drive cross-organizational buy-in and resource allocation.

Engage your own internal resources early on, making sure representatives from across the business are at the table with the overall project team to give their perspectives. It’s also important to involve your banking partners to discuss solutions and brainstorm ideas. If you’re rationalizing banking relationships as part of the initiative, think about regions where you’ll need support and whether your current banks offer services in those jurisdictions.

The most common structures are notional pooling and physical cash concentration. Notional pooling may be a good fit if you have many legal entities, while physical cash concentration may be more suitable for organizations with a simpler structure.

If you’re finding it hard to quantify and define the exact benefits your project will bring, consider whether it’s truly worth executing. For example, building an in-house bank will certainly change an organization, but it may not improve it to a sufficient degree that makes the outlay worthwhile.

Once you’ve scoped the project and put together a team, you can begin the execution phase. This requires close collaboration with your core bank — it should provide robust project management resources to oversee the implementation of products and services. You’ll also need to have your own internal teams assigned to ensure this part of the undertaking remains on track. You and your bank should talk frequently throughout the implementation to drive engagement and momentum.

Be prepared for the project to have a long timeline. Transformations with this many stakeholders and moving parts will inevitably face hurdles and delays — a well-resourced team will be able to work through them. Additionally, once everything is complete and you’ve celebrated your achievement, monitor your cash consolidation solution for several months, keeping your resources engaged and ready to make changes as needed.

Oversee and track your success, based on the criteria you agreed upon when you scoped the project. You should also look for incremental improvements you can make along the way. Perhaps you’ll find a way to consolidate cash from a new entity in Germany, for example, or include cash you hold in China. Changes like these should be easier to implement now that you’re adding to a strong preexisting structure.

Whatever your goals, a well-implemented cash consolidation project can be a win for everyone. Treasury will benefit from greater cash oversight, your finance team may realize cost savings and accounting could save resources through automation, while your tax team should appreciate potentially lower liabilities. But because this kind of transformation takes significant resources, it’s worth planning carefully and quantifying what you want to achieve. To find out more, contact your Bank of America representative.