Key Themes For Treasury Management In 2023

4 mins read

6 January 2023

Treasury priorities have evolved as a result of political uncertainty, technology breakthroughs, and global economic insecurity in international marketplaces.

The main priorities for Treasury teams in 2023 include strengthening liquidity management, boosting cash forecasting capabilities, and improving the organization’s capital structure. Many of these themes are still vital in 2023, but priorities have evolved as a result of political uncertainty, technology breakthroughs, and global economic insecurity in international marketplaces. That being stated, here are four critical elements that finance and treasury leaders must be aware of:

Enhancing Liquidity Management 

Given the uncertainties that modern financial leaders face, it is critical to adapt your liquidity management plan to shifting conditions. It should be noted that new technology can promote tactical and strategic evolution. Not only does technology influence how payments are made, but it also influences how businesses handle and account for payments. Many businesses are seeking for ways to streamline their payment procedures, and the rewards are substantial.

Companies can save money by integrating payment systems with their current treasury workstations and ERP infrastructure. A central payments system will incorporate the most recent security procedures and regulatory compliance modules, as well as the ability to accept all payment kinds. Furthermore, visibility is essential for boosting controls, and implementing cloud-based ERP or treasury workstation solutions can connect cash flow planning tools with your company’s CRM and sales management systems. This may be a great tool for providing relevant visual cash flow measurements to leaders across the firm that represent the strategic drivers of rigorous cash flow management.

Improving Cash Forecasting Capabilities

A company’s worst nightmare is running out of cash or miscalculating future cash inflows and outflows. To avoid such disaster scenarios, businesses employ cash flow forecasting tools to better understand their existing and future financial positions. It is critical to have accurate cash forecasting assessments in place because they are critical to the company’s success. CFOs can base strategic investments and financial decisions on them, and they can help CFOs decide how to shape the company’s future.

Cash flow forecasting, like most things, is easier said than done. Creating accurate forecasts can be a difficult task. CFOs must examine numerous factors, especially as the company grows in size. Fortunately, there are several excellent cash flow forecasting tools available to assist CFOs in overcoming obstacles and making forecasting easier and more accurate. Such solutions will provide CFOs with a real-time snapshot of the company’s cash situation, inflows, and outflows whenever they need it. The more recent the data, the more effectively CFOs can justify their judgments.

Since the previous year, it has been widely accepted that both the gathering of real-time information and the connectivity to all source systems should be automated, allowing CFOs to receive real-time insight into their cash position without the need for manual labor. On that topic, organizations should examine their software and seek for methods to improve or enhance such systems so that those insights can be categorized and effectively transmitted to CFOs, since finance chiefs continue to struggle with optimizing such data. Companies should identify strategies to update their current systems in order to improve cash forecasting capabilities in 2023.

Optimizing Capital Structure

There is an increasing focus on how corporations change, or fail to modify, their leverage. The adjustment pattern is interesting because it can assist to distinguish between competing capital structure theories. According to prior research, corporations are more likely to issue stocks when their market valuations are considerably higher than their book values and their past market values are high. As a result, the companies become underleveraged or have their obligations lowered in the short term.

Due to the companies’ relatively quick changes of ideal capital structures, the outcomes of long-term measurement on capital market timing do not seem to have an impact on the choices made by the firms regarding capital structures. The analysis leads to the conclusion that equities market timing is significant in the short term but not in the long term.

It is obvious that economic conditions are dynamic, and businesses cannot operate in a market that is actively using stagnant and outdated business practices. To avoid problems like those in the previous example, finance leaders and CFOs must have a longer-term view than a short-term one while attempting to optimize a company’s capital structure. Before changing their capital structure, CFOs should also keep the business objectives in mind.

Being A Value-add To CFOs & A Strategic Advisor

In terms of financial affairs, treasury experts essentially serve as the company’s trusted consultants. They are constantly thinking ahead and strategizing how they may provide value and promote success. Performance and financial results will be directly impacted by the choices they make. It is clear from the nature of their position within the organization that they must collaborate closely with the CFOs and other business leaders in finance. A working partnership between the two is necessary.

Treasury professionals will evaluate the risk, consider the benefits and drawbacks, and offer recommendations on whether a company should extend operations into a new location in order to produce significant income and get a competitive advantage. If so, they will help the CFOs create and carry out a financial plan that supports business growth.

In a different scenario, economic issues including interest rate increases, regulatory changes, and unstable currency exchange rates can seriously affect any firm. Treasury experts will examine these market conditions, predict how they may or may not affect the company, and work with CFOs to develop ways to reduce any potential financial risks to the company.

The treasury function has unquestionably become more significant and has improved in terms of the versatility that needs to be taken into consideration. Businesses must consider these important treasury management themes in 2023 if they want to guarantee the long-term survival of their enterprise during these years of highly volatile markets.