Automation boosts efficiency in treasury

Excellence in treasury management is key to superior financial performance.

A new study from Citi revealed that companies that nurture treasury teams to be leaders enjoy better financial performance, citing a stark correlation between treasury performance and overall financial outcomes.

Anton Abraham, Asia Pacific Head of Client Advisory for Treasury and Trade Solutions at Citi, said that one of the key areas that companies should focus on when it comes to improving their treasury performance is automation.

"Digitalization, especially automation, boosts efficiency within Treasury operations," he explained, citing examples like automated transaction processing and reconciliations. This automation not only mitigates human error risks but also frees up staff to focus on strategic tasks that further enhance organisational performance.

Ron Chakravarti, Global Head of Client Advisory, added another dimension to this transformation: data-driven decision-making. He said that the adoption of advanced technology and data strategies allows companies to gain crucial visibility and analytical support, which also contribute to a company's financial health.

This approach facilitates faster and more distributed decision-making processes. "Digitalization is enabling data-driven, better decision-making," Chakravarti stated.

"Companies with top quartile treasuries demonstrated materially higher returns on invested capital, assets, equity, and notably, a higher net margin," Chakravarti explained. 

Both experts agreed that the adoption of digital technologies and data strategies is not just about looking at past data but also about being forward-looking. As businesses become increasingly real-time in their operations, digitalization in treasury becomes an essential part of adapting to this new reality.

Abraham identified three specific treasury practices that contribute to higher Return on Invested Capital (ROIC): effective cash management, robust risk management strategies, and strategic funding and capital structure decisions. 

He elaborated on the importance of optimising liquidity and investing strategically in cash management. In risk management, comprehensive practices protect capital and ensure consistent returns, contributing to a higher ROIC, adding that strategic decisions in funding and capital structure, including the right mix of debt and equity, are also crucial in optimising the cost of capital and enhancing ROIC.